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The Community for 6 & 7-Figure Store OwnersMon, 19 Feb 2018 22:29:36 +0000en-UShourly1https://wordpress.org/?v=4.9.4http://creativecommons.org/licenses/by-nc-nd/3.0/ecommercefuelhttps://feedburner.google.comSubscribe with My Yahoo!Subscribe with NewsGatorSubscribe with My AOLSubscribe with BloglinesSubscribe with NetvibesSubscribe with GoogleSubscribe with PageflakesSubscribe with PlusmoSubscribe with The Free DictionarySubscribe with Bitty BrowserSubscribe with Live.comSubscribe with Excite MIXSubscribe with WebwagSubscribe with Podcast ReadySubscribe with WikioSubscribe with Daily RotationThanks for subscribing to eCommerceFuel!WooCommerce: An Increasingly Viable Option in 2018http://feedproxy.google.com/~r/ecommercefuel/~3/D7XhnH87VtU/
https://www.ecommercefuel.com/woocommerce-review-2018/#commentsFri, 16 Feb 2018 11:00:44 +0000https://www.ecommercefuel.com/?p=3234New post from eCommerceFuel:

For a long time it has felt like WooCommerce has been the underdog in the world of eCommerce shopping carts. But that might all change. In fact, 2018 might be the year of Woo. This week, we’re talking with Brian Krogsgard from PostStatus.com and Zach Stepek from MindSize.me to chat about the potentials and pitfalls [...]

For a long time it has felt like WooCommerce has been the underdog in the world of eCommerce shopping carts. But that might all change. In fact, 2018 might be the year of Woo.

This week, we’re talking with Brian Krogsgard from PostStatus.com and Zach Stepek from MindSize.me to chat about the potentials and pitfalls of WooCommerce, how it compares to other carts in the eCommerce landscape and what we can expect from them in the upcoming year.

We chat about:

Why WooCommerce is gaining in popularity

How it compares to Shopify in terms of its out of the box capabilities

Andrew: Welcome to the eCommerceFuel Podcast, the show dedicated to helping high six and seven figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow eCommerce entrepreneur, Andrew Youderian.

Hey guys. It’s Andrew, and welcome to the eCommerceFuel Podcast. Thanks so much for joining me on today’s episode. And today is week number three, I think, in Shopping Cart Month here on the show. The first two weeks we talked about to Shopify and Magento, and today we’re gonna be doing a deep dive on WooCommerce, which is the third most popular cart in the community. So I’m joined by Zach Stepek who’s a partner over at Mindsize.

They focus on web development specifically with WooCommerce and Shopify, and he’s also our official WooCommerce expert in the e-commerce field private forums.

And I’m also joined by Brian Krogsgard of Post Status. Post Status is a community and paid subscription in the WordPress space. And I got to know Brian this last summer when he was kind enough to invite me down to speak and attend his conference in Atlanta, which was really cool. Got to go and spend time with a lot of really smart WordPress and WooCommerce people, and it was very…

It was cool to see what they’re doing with the platform. Impressive. There’s a lot of development and thought and energy going into WooCommerce, at least specifically for the sake of this discussion.

And so I was excited to talk about it and put it on my radar in a way it hasn’t been in a while. So a little bit of detail before we get into the discussion context for WooCommerce. So in our community, we have about 1,000 members, and of those 1,000 members, at the beginning, you know, right around the beginning of 2018 there were 73 members who were using WooCommerce. And it had a star rating of 4.3 out of 5. So for comparison, just as a reminder, Shopify has about, you know, 400-ish members. Magento has about 80 members using it.

Shopify was rated 4.7 out of 5, and Magento was rated 3.8 out of 5. And kinda talk about… I’ll get into this in the discussion so I won’t belabor it too much, but I do think potentially, WooCommerce is gonna… I don’t know if they’re there quite yet, but I think there’s a good chance that they will kinda replace Magento as the de facto open source cart for people in that six, seven, and eight-figure range. We’ll see. I could be wrong. And maybe it’s a little bit of a bias of the fact that I went to a WooCommerce event versus a Magento event.

If I would have gone to Magento, I don’t know, maybe I would have been…had a little bit different thoughts on it. But being someone who has come from the Magento world and left it due to complexity it was, you know, I think that might tamper it a little bit. So, anyway, just a little context for where WooCommerce is in terms of the adoption rate.

So we’ll get into the discussion with Zach and with Brian. Quickly, before we do, I wanna thank our two sponsors. And our first sponsor’s very fitting given the topic of today’s episode, and that is Liquid Web who offers a rock-solid hosted solution for hosting your WooCommerce store.

So if after you listen to this episode you decide Woo is something you wanna start exploring, or if you’re on Woo right now, especially if you’re, you know, a seven or even an eight-figure store, you need to check them out. Couple of reasons. One, they’ve got a whole suite of tests that you can use to run against your store to simulate different scenarios, traffic, things like that, to make sure it is rock-solid under any circumstance. They’ve got a staging platform to help you test out some of those changes you make before you push things live.

It’s a highly elastic solution so that, you know, if you get… Really, if you get a massive influx of traffic your store is gonna stay online when it matters most, which is often one of the biggest downsides of hosting your own store. And it’s just a rock-solid platform for hosting WooCommerce. So if you’re looking for that, check them out. You can learn more at ecommercefuel.com/liquidweb.

And secondly, I wanna thank the team over at Klaviyo who makes email marketing easy and powerful. Their killer feature, of course, is just the ability to provide and create almost crazy, creepy customization based on what your customers do, what they purchase, what they don’t purchase, you know, how much they have purchased. And you can set these flows up to run and target people based on certain criteria and then they run in the background automatically and create sales for you.

I think Michael Jackness, who is a good friend of the show over at eComm crew, he gave a presentation last year at eCommerceFuel Live saying how, you know, he generated more than 50% of his revenue from his automated flows on Klaviyo. So if you’re not using them, you can check them out and get started with a free trial at klaviyo.com. All right. Let’s go ahead and jump into today’s discussion.

Woo’s Position in the Marketplace

Andrew: Guys, so I’d love to kick off our discussion by a high level, just kind of giving you my thoughts on WooCommerce in terms of general in terms of market position, where they’re at, and given that you guys know much more about this space than I do, let me know if you think it’s fair, if it’s accurate, or if it could use a little tweaking.

So the way I’ve seen it over the last year is WooCommerce has historically been somewhat of an underdog. But I feel like this last maybe 12 to 18 months they’ve started to slowly emerge as a viable alternative to Magento for people who want to really customize their site, or have ownership.

I mean, the top three sites, carts rather, used by members in the eCommerceFuel community are Shopify, Magento, and then right behind Magento almost, you know, neck and neck is WooCommerce. And having left Magento myself due to the complexity, I know a lot of people are going from Magento to Shopify.

But if you need to control, you know, the entire experience or all your data, it seems like Woo is kind of a nice, lighter weight option that still has some functionality to it. I’m starting to see more growth and maturity in terms of people supporting the platform, in terms of development.

So that’s, kind of, my take on it, at least what I have seen in the last 12 months. Is that… You guys think that’s fair or is that a little bit off? Maybe, Brian, we can start with you, and then Zach.

Woo Is Popular for Attaching to Existing CMS

Brian: Sure. I think I would phrase it a little differently in that I think using WordPress for e-commerce generally, is becoming more popular. And WooCommerce has been the dominant player within the WordPress ecosystem for a long time. The question has been whether WordPress is suitable for e-commerce in the first place, and WooCommerce is slowly proving that out. But if you talk about pure e-commerce market share, if you look at a tool like BuiltWith, WooCommerce is actually the dominant e-commerce platform probably on the long tail.

So a lot more people are using WooCommerce than pretty much anything else, but it changes, the statistics change if you look at people that are just doing e-commerce. So like your community is gonna be significantly different where e-commerce is the central focus of the website, but using a bolt-on e-commerce platform that attaches to your existing CMS is what’s made WooCommerce popular.

And similar to WordPress itself which started as a blog platform and morphed into a CMS with a lot of power and control, WooCommerce is essentially going through that exact same process of, kind of, legitimizing itself in a broader spectrum to compete with Magento and to compete with Shopify, for that matter.

But it’s still relatively early in those stages of both from the power and the utility perspectives.

Woo’s Capacity To Handle a Large Store

Andrew: Zach, do you see me touching on the Magento thing? Do you see WooCommerce becoming more of an alternative for Magento for merchants, in, like, let’s say the mid-seven, you know, high six or mid-seven range or do you think that’s unfair?

Zach: Well, seeing as we have clients that are doing high eights on WooCommerce, I would say it’s definitely a competitor in that space. But honestly, it’s competing with some of the higher-end tools that are out there too. Even things like Hybris at some levels, you know, with the right team and the right infrastructure you can run a really large WooCommerce site.

Andrew: What influence… So WooCommerce was bought by Automattic, which is the company behind WordPress.

Brian: Dot com.

The Effect of Automattic Buying WooCommerce

Andrew: Dot com, WordPress.com. Was Automattic buying WooCommerce a good thing or not? Have they invested a lot into it over the last two years? What did their purchase and investment bring to the product and to the development?

Brian: Yeah, it’s been a huge deal in terms of pouring resources into the product. WooThemes was actually a theme company, and the origins of WooCommerce was people wanting an e-commerce WordPress theme, which is kind of hard to wrap your head around, but it morphed into this much greater product.

I actually have been involved with WooCommerce since the week it forked because I was building a website with the software that it forked from called Jigoshop. So I’ve been using it for a really long time, and ever since it was released it’s just been on this massive growth rate.

And they’re just kind of learning and improving as they go, and they just didn’t really have the resources to keep up as a 25, 30-person team with WooThemes. And Automattic has poured millions of dollars of development effort into the product and really done a lot to progress it, and really enable them to have this competition with Magento and Shopify in the first place.

I think it would’ve been a lot harder for WooThemes on their own to even be in this conversation right now. It would still be a much more niche product or more difficult to wrangle for the types of uses that Zach’s company is using it for, for example.

Woo Vs. Shopify: The Strengths

Andrew: It’s a good segue. Zach, let’s chat about maybe some of the strengths of WooCommerce versus, especially Shopify, because you’ve done development, Mindsize, your agency, does development with WooCommerce particularly, but you also have a lot of experience with Shopify and other carts. What would you say the biggest strengths of WooCommerce are just in general maybe, you know, with people thinking about other carts as well in comparison? What’s Woo really good at?

Zach: Well, I would say the biggest selling point for WooCommerce is it’s a much bigger sandbox to play in. You have way more capability out of the box because it’s open source. You can write code that makes it do literally anything. From that standpoint, when we’re starting out with a project, one of the first things that we’ll look at is, does this project need something custom? So, you know, for things like that, it totally makes sense to look at WooCommerce as the option.

The heavy integrations with third-party services, you’re either looking at, yeah, if there’s not something already written and you’re building it yourself, you’re either looking at Shopify Plus or you’re looking at WooCommerce. And WooCommerce has a much lower cost of entry since it’s open source and free.

Andrew: Is that just because the API for the regular Shopify plan isn’t as robust as Shopify Plus is?

Zach: I would say, “What API?” But there isn’t much there really, on the free plan. There’s not a whole bunch you can do. So when you’re getting into building a custom application, you’re really looking at Shopify Plus. So, you know, really depends on where you are on your growth curve, what kind of business you want to be running, because, you know, if you’re running a business where you’re using WooCommerce, you’re going to be either paying somebody to manage or managing servers in WooCommerce or hosting and at least plugin updates.

If you just want to set it, forget it, and walk away, then Shopify or a different platform as a service would be probably a better bet for, you know, a store owner that is looking to just set it and forget it.

Multi-Currency and Multi-Language Support

Andrew: And what about multi-currency and multi-language support? I know a handful of Shopify owners who have been waiting for both of those to come out. How is that on WooCommerce right now?

Zach: There are definitely plugins available that do both, so multi-language is actually… Because WordPress is, you know, the largest publishing platform in the world, over 29% of the web now? Yeah, that’s the new statistic as of a couple weeks ago. Because of that, you get all of the tools that WordPress has, so multi-lingual support is there. Multi-currency support, there are options and most of them are pretty good, whereas with Shopify as you know, if you want to have multi-currency, you’re spinning up another site.

And if you’re on Plus you have 10 sites total that you can run. So if you need more currencies than 10, you’re going to be paying in addition to that above your normal Plus plan.

A Solid Option in the Middle Lands

Brian: This might be a little bit of a situation too where you might have more up-front costs with any self-hosted software where you’re doing development to get it done. And it’s not like point and click to get… It can be, but, you know, if you do things really on the up and up it might be a little more than point and click to get great multi-lingual support in WordPress, or whatever feature you want.

And I think sometimes these use cases for WooCommerce and Shopify are a little bit barbell-shaped. So like Shopify, it’s probably the easiest way for someone to do their very first e-commerce store.

And then when you get to the Shopify Plus range, it might be more scalable and cheaper to pay the thousands of dollars a month to Shopify Plus, but they handle all the hard parts for, you know, Black Friday scalability or whatever.

Whereas WooCommerce might fit really well in the middle lands of that scale where you wanna wrangle things, you want things that are custom, you have some upfront investment that costs money but then your month-to-month is cheaper than Shopify Plus but more powerful than like a regular Shopify plan. And I think that’s kind of the sweet spot right now for WooCommerce personally.

And The Cons: Upgrading for Custom Fixes

Andrew: What about… So kind of a…that sounds like Shopify for… The customization and control is really the big selling point, you know, versus something like Shopify for Woo. What about some of the bigger weaknesses? And Brian there we can start with you on this one. One that comes to mind, upgrades for me, like, my experience coming from Magento…well not the whole reason, but one of the very compelling reasons I left Magento was upgrading was nightmarish.

It was just horrendous. I mean, might as well just started a, you know, installed a new version of Magento and built it from scratch, which is actually what we did in one upgrade past because we didn’t wanna try to upgrade the core.

Our upgrades with Woo especially, when you’ve customized it a lot because if you’re using Woo, chances are you’re doing it because you want to customize it. So how does that look?

Brian: Yeah, they’ve really improved it a lot. WordPress generally, a core principle is maintaining backwards compatibility as well as possible, so that even if something’s deprecated, it still works for a long time. WooCommerce has historically not necessarily followed that same path of, like, backwards compatibility respect if you will. And I still remember back in pre-2.0 days where it was a lot of work and what not to upgrade, but still, nothing compared to what, like, say, upgrading from 2.7 to 2.8 would be, or Magento major version to major version.

But it still had potential headaches where they made drastic changes one release to the next. Last year they had made a change to something called Semantic Versioning, which better brings in the concept of minor releases and major releases, and WordPress itself doesn’t work as much that way. So WooCommerce now, when you go from 3.0 to 4.0 to 5.0, those are like major, major, releases.

And then within that, you know, 4.1, 4.2, whatever, those are gonna be much better respecting of backwards compatibility and make it to where you can more reliably click upgrade and not be too scared of everything.

But even in the worst-case scenarios, custom WooCommerce sites in my history, I haven’t required, like, full weeks of upgrade plans and stuff. Little things could go wrong potentially, but for self-hosted software, it’s about as straightforward as you can get.

Andrew: That was cool because you do think about it and you’ve got three layers or you’ve got core WordPress which evolves and you have to upgrade. You’ve got WooCommerce which evolves and you have to upgrade, and then you have the extensions sit on top of that and then you have your own customs. So you actually have four layers, right?

Brian: Yeah, but not a series of best practices. You could still get into trouble, but if you kinda know how it works and know the progression of upgrades for instance, and that stuff the WordPress itself can do better in terms of supporting plugin ecosystem models like WooCommerce to be able to better support that.

Because really, Zach can attest to it, like, you should probably be upgrading your extensions before you upgrade WooCommerce and stuff like that. So better supporting that kind of thing is good and so you can still get into trouble, but all in all, it’s not… I wouldn’t say it’s bad, per se, and Zach may be able to speak better to that.

Zach: They’re normally pretty seamless because one of the things we do as an agency is we implement on enterprise-level deployment and development workflow. So, you know, all our code is in a code repository and it’s all version control, and deployment to the site happens from that code repository based on it being tagged for release.

So now we are testing everything locally, we’re testing everything in the staging environment before anything touches the production site. And only when we’ve done strenuous testing to make sure that everything is ready are we pushing anything to production.

The Upgrade Investment

Andrew: In terms of the work that it would take to kinda get that staging site looking good, clean feeling, like, it was you felt great to push it live, is that something maybe on a scale of 1 to 10, 1 is, you know, 1 press button, 10 is, you know, 3 months of agony. How many hours are let’s say, you know, doing just a standard WooCommerce upgrade for, say, someone doing a couple million dollars a year in sales? How involved is that gonna be from like in an hours invested standpoint?

Zach: It really depends on the mix of extensions that are being used and plugins that are being used on the site. But you’re looking maybe a couple of hours if you’re on the right hosting.

Site Speed Could Be Better

Andrew: Okay, great. I tried to dive into weaknesses and then I get sidetracked with migrations because they’ve been some things that have cost me a lot of angst over the years. Let’s get back into weaknesses. So customization control, the biggest strength of WooCommerce. What are some of the big weaknesses that the platform has? And Zach, maybe we can start with you and then go to Brian.

Zach: Well, I know that for a lot of sites, one of the weaknesses is site speed, and that’s really just because they don’t know how to optimize the site correctly to make it fast. It’s really just a matter of making the right decisions, making sure your images are optimized. That’s a huge, huge change.

The Pain Points of Self-Hosted

Andrew: Brian, any big weaknesses to add apart from speed on the Woo side?

Brian: Yeah, I mean, I would just say that our expectations have changed over the years in terms of how easy we want things to be, and self-hosting is in contrast to that, you know. When you’re self-hosting software, it’s so much harder than what we experience on a day-to-day basis with the wealth of hosting services that we enjoy, whether that’s email with Gmail or just using social media or using a platform like Shopify. And they have a huge development team that their job is to keep it running and efficient.

And when you’re using self-hosted software, the people that develop the software can do so much, but you’re inevitably the one responsible for running it. So the big challenge for WordPress broadly and especially when you get complex applications on top of it like WooCommerce, you’re really dealt with this challenge of creating these opportunities for power and control which self-hosted software enables.

And then also trying to create a competitive experience in terms of usability and ease of use, ease of upgrade, like, all these passive resistance, making all those workable when your competition is a hosted service like Shopify.

And that’s a challenge that over time is being dealt with, but it’s not an overnight process because it’s tough to make something powerful, flexible, and simple. You know, it’s one of those kinda pick two type of things.

The Resources Needed To Be on Woo

Andrew: Right. Even on the eCommerceFuel site, we’ve got the directory we built out that powers a lot of our software reviews and, you know, kind of software stat and usage based on the community use. It’s a custom WordPress app that we programmed, that we put it together. And on average month we spend between $250 to $500 just maintaining it in terms of updating files that go out or bugs, all of that kind of stuff. And so it’s probably a good segue into thinking about what kind of resources someone needs to commit to that.

So maybe apart from, you know, apart from major development projects we’re not talking about, “Hey, let’s put… Let’s do feature X, Y, or Z,” but once you have the store up and running, how many hours in maintenance per month and roughly how much money should someone plan on budgeting just to keep things secure and running smoothly? Is that, kind of, in the same range that I was talking, that $250 to $500 range?

Brian: I’ll come from the store owner perspective even though I’ve been a developer as well. But I run a store within that range and the functionality of e-commerce is part of my livelihood. So for me not doing day-to-day development, I’ve been running basically, the same code base for several years now.

A day a month working on upgrades, or if you have that farmed out to somebody for a few hundred bucks, a small retainer should help you get that done. And for what you get out of that it’s probably worthwhile compared to however many thousands of dollars I’d have to pay for something like Shopify Plus.

But you still have to compare it to what you might get out of Shopify, out of the box or some hosted service if you’re not doing things that are more complex. My personal use case is more complex, but to me, if you’re relying on the business a few hundred dollars a month to maintain it, it’s not so bad.

Andrew: And what’s your store if people wanna check it out?

Brian: poststatus.com is essentially a trade magazine for WordPress professionals if you will.

Andrew: For people listening, like, what Brian does is he kinda has, like, eCommerceFuel, much better version of eCommerceFuel for the WordPress community in terms of a newsletter, an event. That’s how we got to know each other, was you were kind enough to invite me down to your event in Atlanta and great event, by the way. I really enjoyed it. But it’s been fun comparing notes because we do kinda similar things in just slightly different niches, so that’s been really cool to…

Brian: I literally just sent an email forwarding your email to some contractors that I work with talking about ideas we can steal from you, so…

Andrew: Nice. When you come into e-commerce, when you start the coup just let me know so I’m ready for it.

Brian: I don’t think anytime soon, man. You’re doing a great job.

Finding Good Developers

Andrew: Well, thanks. With developers given that Woo is written and WordPress is written on PHP Pirates by the most popular application out there powering the, you know, the most sites online. How hard is it to find good developer talent? Is it something where, like in anything, you know, it’s…

You gotta step through, you know, the bad to get to the good like anywhere, but given that it’s such a, you know, a well-used platform, does that mean that with a little bit of careful looking, you can really find some great developers? Is there a huge pool of developers, or would people be surprised how difficult it is to find a solid WooCommerce developer?

Brian: I would say “yes” and “no.” There are, you know, people that are talented probably in every mid-market to large market city that have familiarity with WooCommerce and WordPress. That said, it depends on what your needs are. There are definitely some elite developers and agencies for going that next level. Most people just don’t need that. But if you need something like that, there are people like Zach and his team and other teams that do this really high scale stuff.

Zach: I would have to agree with that. There are a lot of good developers. There aren’t a lot of advanced developers in the WooCommerce space, but there are a lot of good developers. When you get to that level that then you’re looking at us or at Coolblueweb or SAU/CAL or any of the other Woo experts that are listed in the Woo Experts’ directory on WooCommerce.com.

Not The Best Admin

Brian: I would also qualify in terms of what people are actually ordering in the store, and I think you do this Andrew. When you talk about, like, what is scale anyway? Like if you’re getting 100 orders a week or even 100 orders a day, that’s perfectly manageable, you know. Going back to weakness. This is a weakness of WooCommerce is that the dashboard itself, if you’re doing reporting and all this other stuff in WooCommerce, it can be a real challenge. And I was really enlightened when I started using an app called Metorik.

It essentially takes all the data from WooCommerce and puts it in a LayerVault app that’s specifically for essentially monitoring your orders, dealing with stuff, and doing some reporting and tasking with the store data. And it puts it in something that’s a lot more performing.

So that really made it easier for me when I was handling more orders or just, kind of, dealing with more data to get me out of the WordPress admin. Because the WordPress admin is just really not caught up in terms of, like, being a fast, single page app and all that kind of stuff, and Metorik made that a lot better for me.

Andrew: All right. How do you spell that?

Brian: It’s like M-E-T-O-R-I-K, I think.

The Software Ecosystem

Andrew: Okay. Great. I wanna hear you guys discuss on the ecosystem because so much of… When I went from Magento to Shopify, one of the reasons I did apart from the hosting nightmares and upgrade issues was just the ecosystem of developers, but especially apps and things I could plug into that’s such a huge consideration for people. How does it compare to, and maybe we can use Shopify and Magento, you know, as comparisons. How well built-out is that ecosystem in terms of the software and the apps and all the plugins and themes in the space?

Zach: It’s pretty well built-out. I mean, the one thing I would say is that you have to be careful what you install because it’s open source software, so anybody, anybody, can write a plugin and then release it. So there’s no, you know, panel of people that are verifying the quality of things especially if they’re offered through a third party site. So like I said earlier, you know, pick the marketplaces that are more reliable as far as, you know, where you’re buying your plugins from.

Favorite Marketplaces and Extensions

Andrew: I mean, where…to jump in there. If you had to list a handful of marketplaces, let’s say three or four of your top favorite either marketplaces or really solid shops that put out high-quality extensions, what would those be, or who would those be?

Zach: Well, I’d start with anything that’s on woocommerce.com, that’s SkyVerge and Prospress and a whole bunch of other developers. You know, Daniel Espinoza runs Shop Plugins, which is another great marketplace. There is some really cool stuff on there. One of our employees, wrote a whole bunch of really cool things for subscriptions that’s available as a plugin on Shop Plugins. Those would be the marketplaces I would start with, and I’m just gonna go out there and say there are a number of places I wouldn’t go.

And if you wanna talk to me about where I wouldn’t go, hit me up on Twitter or by email.

Andrew: You don’t have to throw people under the bus with all these people listening. That shocks me.

Brian: I would just note that you kinda… If you start using something, you marry the extensions that you’re using and having run a store for several years, there are some things that I use that I don’t love and I would love to get rid of them. And sometimes that’s an official extension too, so I think being judicious with what you’re using and asking yourself, “Do I need this feature? How will it benefit my bottom line?” those are important questions.

Because the less stuff that you’re adding on top of it, the less maintenance and all that kind of stuff that you’re gonna require. So I would just said try to use caution and go slow in terms of, you know, just installing all these extensions because you might do this or you might do that someday.

Zach: And for God’s sake, if you buy a theme from a marketplace that includes 7,000 plugins with it, don’t install of them. Only install the ones you need. You don’t need seventeen sliders.

Andrew: What about hosts in the space, guys? Any sliders? Sliders are the… You gotta love sliders on e-commerce stores. Hosting the space that you guys like with a good host, I mean, some of the stuff we were talking about earlier in terms of creating core, of creating WooCommerce, staging platforms, all those kind of things.

They can make, probably not fully eliminate but at least, at a minimum, make it all easier to manage some of the technical side of things. I would love to hear from both of you guys, maybe your, you know, about one or two of your favorite hosts in this space for hosting WooCommerce.

Brian: I have three that I can list that I would feel confident recommending to someone, and you can kinda meet your budget level on all three. And those would be… If I kinda go from, like, the highest hands-on approach to the lowest hands-on approach, it would probably be Paige Lee who runs off AWS. At a really high end, that’s, kind of, your VIP-level scenario, and then Liquid Web also does a fantastic job. And Liquid Web’s really worked hard to build out their e-commerce tools specifically, and I know Zach’s company has actually worked on some of those tools with them.

And then a smaller host, well kinda, it’s owned by WordPress.com and Automattic, is Pressable, which is where they’ll send you to if you’re on WordPress.com and you say, “Hey, I want e-commerce.” They’re actually gonna send you to Pressable. So Pressable has some catered tools for e-commerce now and that’s actually owned by the same people as WooCommerce itself. So those three, they’re all working really hard on e-commerce and it’s kinda hard to go wrong within those three, in my opinion.

Andrew: Great. Zach?

Liquid Web for Managed WooCommerce

Zach: I’d have to agree with most of those recommendations. I’m gonna add a couple of things to it. If you’re really high-volume, then looking at WordPress VIP is never a bad idea. If you’re looking for something like a managed WooCommerce, which only one company is offering right now and that’s Liquid Web, you know, that would be something to take a look at. We have done a lot of work with them on their platform. We released custom order tables…

Brian: Not to…

Zach: …plugin with them.

Brian: …overhype your sponsor for the episode, but in 2013 I interviewed Mark Forrester for my own website, back when WooCommerce was just a couple years old and I was…

Andrew: And who’s Mark Forrester for people who don’t know including myself?

Brian: He’s the co-founder of WooThemes and they started WooCommerce.

Andrew: Okay, great.

Brian: So he was basically in charge of the company at the time before the acquisition by Automattic. And I was asking him like, “When the heck are we hosted WooCommerce either from you, or like a catered hosting option from an existing host, or something to make this easier?” And so I’ve been begging for this since 2013 and now it’s almost 2018, and Liquid Web’s really one of the first ones seriously going after this as a product or a service product.

And their product team, their head product guy is a friend of mine and he certainly gets it in terms of what are the needs and what’s a real store owner need.

And he’s not just approaching it from a developer level, but it’s got a huge developer focus as well. But I’m really excited about that product because they’re strictly catering to say, “We’re gonna make this work right.” That’s what we need a lot more of, and more of the hosts are gonna start working on it as well, but they’ve got a nice little head start and a good team working on it.

Andrew: Very cool. Guys, I wanna get close to wrapping us up here, but one thing I wanna ask you about before we do is what, you know, looking ahead to next year, 2018. Do you see any big changes in terms of either the ecosystem of the platform or maybe even more specifically, new things that are coming out in WooCommerce core that people can expect or look forward to?

Zach: I’ll start out that the custom order tables plugin that we wrote that I was just talking about is being put forward as a feature plugin for WooCommerce core. We will have that custom order table in the core WooCommerce product. So all those performance improvements will make it to core, which is part of the benefit of using an open source platform. The other thing that I’m really excited about and it’s a little self-serving, but we’re releasing a search platform called NeuralSearch for WooCommerce. It’s powered by a company called Algolia.

And if you’re not familiar with Algolia, they are a search technology company. And we have tests running right now with their search technology backing NeuralSearch where we’re returning faceted search results from a 40,000, 50,000 product catalog in less than 10 milliseconds. It’s awesome. So I’m really excited about that because well, it’s our product, so…

What To Watch Out For in 2018

Andrew: We’ll link up to that too in the show notes if you wanna check that out. Brian, anything you see coming down the pipe for 2018?

Brian: There’s two things that I think are exciting. One is, I would say, Automattic will start to work more in terms of integrating difficult computational tasks if you will. Like, things that WordPress.com’s servers, their enormous data centers that do a whole lot of stuff, they’re gonna continue to bring some of that processing power to WooCommerce stores, like your average WooCommerce store. So even if you don’t have this higher-end hosting, you can do something with more power behind you.

And that’s gonna…that’s a similar business model with WooCommerce Services, or whatever they’re calling it to the way Jetpack plays a role in WordPress itself, bringing some of the Automattic server power to a regular role website. And that will make it more accessible for, kind of, your average ecommerce store owner.

The other thing I would say is just with WooCommerce maturing in general in terms of a user experience and better catering to actual store owners. So Zack’s a developer, but there’s this whole other side of things that’s like, “How do I use my store? And who’s involved between your fulfillment side of things, your marketing side of things, and all these different components?”

And I’m just excited to see WooCommerce maturing to be able to serve all of those needs and be a better platform overall. I mean, it’s early days for WooCommerce so I think you’ll continue to see it grow and then get better as it grows to be a better platform and a more viable option for hardcore e-commerce store owners.

Zach: I’d like to add one more thing. One thing that we’ve seen really starting to emerge over the last few months is a lot more of the people that are in the community that are using WooCommerce as agencies or even as store owners are starting to give back to WooCommerce by contributing code and working on the core product in, you know, a few hours a month here and there.

That’s going to be huge because the reason WordPress is the dominating force in publishing is because it’s open source and because the community that has grown around it has made it as good as it is.

And I think we’re going to start seeing the same thing happening in WooCommerce over the next year or two, where the community is going to start making things better where they’re seeing holes. And I think it’s going to be a gigantic change, and hopefully at some point will be in a position where, you know, new features aren’t just reliant on Automattic’s team to get them in. And, you know, we’ll have a lot more community contribution.

The Lightning Round!

Andrew: You guys, this has been awesome, doing a deep dive on this. One thing I wanna do before we hop off the mics here is a quick lightning round. I like to do this with people who come on, just for fun. So, I’m gonna alternate these questions with you guys if you’re cool with that, and I’m gonna with you Zach. If you had to identify the number one thing you’re trying to optimize your life for right now, what would that be?

Andrew: I had a hunch you were gonna say that. Zach, how much money is enough? What would be your number of money in the bank?

Zach: Enough to live comfortably and not have to worry if something goes wrong.

Brian: Oh, that’s not… You weren’t specific enough.

Andrew: You gotta give me a number.

Zach: Oh, man.

Andrew: You just rephrased the question, more or less.

Zach: So for me, a half a million to a million in the bank to invest and then get some proceeds and some interest off of that would be… That would be a good spot.

Andrew: Nice. Brian, what’s the worst investment you’ve made in the last 10 years?

Brian: Probably Twitter stock when I thought it was cheap at 30 bucks.

Andrew: Nice. And…

Brian: I’m waiting to break even on that one.

Andrew: If you’re still holding on to it. Zach, what’s the best investment, outside of your business, you’ve made in the last 10 years?

Zach: Well, I was an Apple employee for a short period of time and I invested in the Employee Stock Purchase Program before it hit a 7 to 1 split. So I bought, I think, two or three shares over the year that I was there and ended up with 21.

Andrew: Nice. And finally, Brian what was the first CD you ever owned?

Brian: I get all the fun questions. I think it was the “Space Jam” soundtrack.

Andrew: That was a good soundtrack. I like that.

Brian: You make me give myself a harder time with the “Space Jam” thing and worst investment. Appreciate that.

Andrew: I’m sorry. The dice rolled out that way. Even if it would have alternated to best investment given that you’re a big crypto guy, there wasn’t gonna be a surprise answer so I had to swap those out. You’re a good sport, man. Well, guys, thank you so much for doing this. If you don’t know Brian and Zach make sure to check out their work. Brian, as he mentioned in the start already, is the man behind poststatus.com.

If you’re in the WordPress community, the WooCommerce community, this is a fantastic, phenomenal, curated newsletter written on a weekly basis by Brian. Check it out, poststatus.com, and also we didn’t really get into this too much.

I alluded to it just a minute ago, but you’ve got a, kind of, a new side project which, man, in terms of how much you’re doing on it and the traction you’re getting, it doesn’t seem like much of a side project. Seems like a full-fledged thing, you’re killing it. If you’re into the crypto space at all, I’d highly recommend checking out ledgerstatus.com articles on the crypto space, of course. But maybe where you spend most of your time, is it fair to say on Twitter? Kind of posting a lot of the stuff there, Brian?

Brian: Yeah, just kinda like I did in the WordPress space building up a name for myself within that community and, kind of, going from zero and it exploded. And now we’ve actually started a podcast as well that’s got the couple episodes out. So I’m really excited about what’s shaping up in that space and hoping to have a full-fledged second leg of my business with a similar operating model.

Andrew: Yeah, I listened to the first episode you put on the podcast. I enjoyed it man. Good work.

Brian: I appreciate it.

Andrew: Yeah. And Zach is a partner at mindsize.me. He and his team over there they really understand if you couldn’t already, WooCommerce of course, but they also work with Shopify and other carts. They can give you a really good sense if you’re not sure. After listening to this, if Woo is right, if Shopify is right, you can chat with him about, you know, which one is the best fit for what you need in your business needs.

And Zach is also our resident WooCommerce expert in the private forums at eCommerceFuel, so if you ever have a question or wanna ping him, you can always do that inside our private community. So gentlemen, this has been a lot of fun. Can’t think of two better guys to come and kick on WooCommerce. And I gotta say, I think this is the first time I’ve ever had three people on a show where we’ve both had…all of us have had mics that just sound top notch, at least from my side, so well done gentlemen.

So it will probably be the first and the last for the eCommerceFuel Podcast. But guys, thanks so much for taking the time to come on. This has been a lot of fun.

Brian: Thanks Andrew.

Zach: Thank you, Andrew.

Andrew: That’s going to do it for this week’s episode. If you enjoyed what you heard and are interested in getting plugged into a dynamic community of experienced store owners, check us out of ecommercefuel.com. eCommerceFuel is the private, vetted community for e-commerce entrepreneurs and what makes us different is that we really heavily vet everyone that isn’t a member to make sure that they’re a great fit, that they can add value to a broader community. Everyone that joins has to be doing at least a quarter million dollars in sales via their store.

And our average member does over seven figures in sales annually. So if you’d like to learn more, if that sounds interesting, you can learn more and apply for membership at ecommercefuel.com. And also, I have to thank our two sponsors that make the show possible. Liquid Web, if you are on WooCommerce or you’re thinking about getting onto WooCommerce, Liquid Web is who you should have host your store, particularly with their managed WooCommerce hosting.

It’s highly elastic and scalable. It’s got built-in tools, performance test your store so you can be confident it’s gonna work well, and it’s built from the ground up for WooCommerce. And you can learn more about their offering at ecommercefuel.com/liquidweb. And finally, Klaviyo, for email marketing, they make email segmentation easy and powerful. They integrate with just about every cart out there and help you build, you know, build incredibly automated powerful statements that make you money on autopilot.

You can check them out and get started for free at Klaviyo.com. Thanks so much for listening, and looking forward to seeing you again next Friday.

Want to connect with and learn from other proven e-commerce entrepreneurs? Join us in the eCommerceFuel Private Community. It’s our tight-knit, vetted group for store owners with at least a quarter million dollars in annual sales. You can learn more and apply for membership at ecommercefuel.com. Thanks so much for listening, and I’m looking forward to seeing you again next time.

We’ve just wrapped our fourth ever live event for eCommerceFuel community members. This time we headed west to the seaside town of Laguna Beach, which isn’t the shabbiest place we’ve ever been to. On today’s episode, fresh off the conference, Bill D’Alessandro and I discuss the key takeaways from the event that we plan on [...]

Andrew: Welcome to the eCommerceFuel podcast. This show is dedicated to helping high six and seven-figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow eCommerce entrepreneur, Andrew Youderian.

Hey, guys, Andrew here, and welcome to the eCommerceFuel podcast. Thanks so much for joining me on this show today. I’m excited about the episode because I get to relive and recap my favorite business event of the whole year and that is eCommerceFuel Live. Talking about ECF Live 2018 which we just wrapped up in January of this year. If you’re not familiar with it, ECF Live is our private event for members of our eCommerceFuel community and we have it every year. This is our fourth year that we’ve had it.

We had about 150 people this year. It’s just an awesome chance to get together with people that over the years have become really good friends, in a fun place, talk shop, catch up, and have a lot of fun. So we’re going to be covering what went on, some of the fun parts of the event, what we’re going to change hopefully next year in the future and have some of those, talk about some of the big take-aways strategically and kind of business-wise that we learned, chatting with other members and listening to presentations.

So it’s a fun time. Bill D’Alessandro, a four-time member of ECF Live attendee, is going to be joining me in just a minute to talk about it. So, it’s a fun episode. I hope you enjoy it.

But first, I want to thank our sponsors for this show, who made this episode possible. First Klaviyo, who makes email marketing automation easy and incredibly profitable. They were actually a sponsor this year for the second time, so Klaviyo, thank you for helping make ECF Live possible this year. And if you’re not familiar with Klaviyo, they do email for ecommerce better than anyone else because they allow you to segment your flows with incredible precision and detail.

And they actually just came out this last week or two with their new visual flow builder, very cool. So it lets you be able to, with drag-and-drop interface, create the flows and the journeys that your customers are going to take based on what products they have or have not purchased, how many times they’ve purchased, all the attributes with Klaviyo that you’d normally set flows with are now worked into their visual flow builder.

And secondly, we want to thank Liquid Web, who now offers an incredibly optimized and stable platform for hosting your WooCommerce store. And if you’re serious about ecommerce and you’re on Woo, a couple of reasons you’re going to want to consider these guys strongly. First, it’s built from the ground up for WooCommerce. Everything from the database calls to the upgrades, it’s designed to make your Woo store just fly and be incredibly efficient and fast.

It’s highly elastic, so even if you get hit with a massive traffic surge, you’re going to stay online, unlike most self-hosted options where there’s going to be, you know, a good chance you’re going to go down if you get a massive traffic surge. They automatically take care of core Word Press updates. They automatically take care of all of your plug-in updates with easy roll-back in case they don’t work.

And it’s all backed up by a world-class customer service and engineering team. So if you’re on Woo and you want the best platform possible for hosting your store, check them out at eCommerceFuel.com/LiquidWeb. All right, thank you, sponsors. We really appreciate it.

And with that being said, I’m going to go ahead and jump into my recap of ECF Live with Bill D’Alessandro.

Our Fourth Ever Live Event

Andrew: Bill, we’ve made it through yet another ECF Live. This is the fourth one, and you’ve been to every single one, right?

Bill: Yeah, do I get a badge at five events?

Andrew: We need to get something for you. That was one thing we wanted to do this year and we just ran out of time, was awards for everyone who’s been to every ECF Live. I was thinking like a huge massive Montana-style belt buckle, you know? You know, we need to do something for it because it’s awesome.

Bill: Sort it out because I’m never going to miss. So, whatever you promise I’m going to hold you to it. I’m going to hit that milestone, so I’m going to ECF every year come hell or high water, so…

Bill: An Original & Seasoned Keynote Speaker at ECF Live

Andrew: It was cool because you were a keynote at the very first one back in Austin. You were a keynote, you’ve talked at other ones, but then you keynoted again this year which was really cool to have you come full circle. We’ll talk about kind of some of the takeaways, but the focus of your talk was very different. I’d say your mindset was very different, you know, four years ago versus this time.

Bill: It was. I mean, I’ve come a long way in four years. My business has come a long way. It was really funny because at the first ECF Live I talked about buying a business and scaling it, with a heavy emphasis on automation, and even in between then and now I’ve talked at a number of conferences with a focus on automation. But this year at ECF the title of my talk was “The 40-Hour Work Week, Building a Big Business,” and it was all about hiring and culture and how to design the organization to be bigger than yourself.

It’s been kind of a new mindset for me, coming from four-hour work week style business to a business that now has 20 employees and, you know, we’re hiring a new person almost every month. You know, I’ve had to think about a lot of things you don’t really think about when you’re trying to figure out how best to connect different APIs together so you can go skiing on a Tuesday. It’s just a very different mindset.

And it was cool because I think it’s become relevant to our community because you mentioned that at the first ECF Live in Austin when I spoke to about 50 people, the average store owner had about $500,000 in revenue. But at this ECF where I spoke to 150 people, the average store owner had $2 million in revenue, which is an indication of how far the community has come.

Small Community, Big Revenues

Andrew: Yeah, it’s crazy. That was one of my takeaways, to jump ahead just a touch, was like how much bigger our community is getting, you know, collectively. I mentioned this in the welcome to everyone. We, like the people just in the room, that 150 people, were doing close to half a billion in sales.

So, I think like the median store owner was about $2 million, but if you average that with some of the people doing, you know, eight figures, there were some outliers there that really pushed the average of the median, but yeah, just like the size. One thing that is a theme I’m seeing much more today than even two or three years ago was people being, like, “Okay, I’ve got a team. How do I hire a COO?” Like, the needs are just very different because we’ve just gotten bigger and it’s really cool to see.

And some members from the very first ECF, four years now today, yourself included Bill, that just have grown so much that it’s the same community in a large effect, but people are in very different places with their business which is really cool to see.

Bill: Well, it’s so cool, too, that we’re all growing together, and there were a number of people at ECF this year that were at the first one, that I’ve been friends with now for four years, and we’ve grown our businesses together which makes it, you know, for me the most valuable community I’m a part of. I mean, it’s truly the only community that I have of peers.

Highlights of ECF Live 2018

Andrew: Yeah, it’s fun, man. It almost feels like you’ve got a little bit of family, which is cool, and get like a big family reunion every year, which is a lot of fun. So, speaking of like the fun parts, maybe before we get into kind of some of the strategic takeaways, you know, the big ideas that we came home with, maybe we could touch on some of like just the overall fun, your favorite parts of ECF Live in general. I’ll start with one.

Like we had it in Laguna Beach right on the ocean and the venue was the Surf & Sand. I have to say this. It was probably my favorite venue that we have ever had. Just waterside, all of the rooms had fantastic views of the ocean, pretty good weather for most of the time we were there. The venue like, especially for northerners like myself coming from Montana with a foot of snow on the ground, oh, man, I couldn’t get enough of it, the venue was amazing. Probably one of my favorite, you know, non-people part of the trip it was just the venue.

Best. Venue. Ever.

Bill: Hands down, my favorite venue too. The hotel was situated right on the beach in Southern California, Laguna Beach, and it was so close to the water that as you went out on the balcony of your hotel room it felt like you were on a cruise ship. You were almost hovering over the water, and the views were 180 degrees all the way down the beach. It was awesome.

Andrew: You were kind enough, like the closing night, you were really cool. You opened up your hotel room. You had a hotel room like with a balcony that overlooked everything and could fit a bunch of people in. You had a sweet little after-party at Bill’s suite. I was shocked we did not get shut down by somebody because we were in there until like 3:00 a.m.

Bill: Yeah, we had probably 50 people. We ordered eight pizzas, and beforehand we had had the foresight because it’s now the fourth year we have done this. Brandon, Eli, and I went out, and Mike Jackness and a few other guys, bought some alcohol, so we had shots and wine and beer, and it was a total riot. I cannot believe Security didn’t come, and actually when you mention it, now that you mentioned it before, the last night closing after-party is one of my favorite parts of ECF.

I always am one of the last people to bed and I just love knowing that, you know, we can sleep in the next day, don’t have to worry about getting up early. Just being able to stay up late at night and build some friendships with the other ECFers is my favorite part.

Andrew: Yeah, it was really fun. But the first thing, I don’t know if I’ve told you this, Bill, but the first thing I did when I walked into the after-party in your suite was I looked at the balcony and I saw like 30 people on the balcony and immediately from a business owner sense, I like just saw massive amounts of liability. I just envisioned headlines in like, you know, the Wall Street Journal, you know, “Balcony Collapses in California with 30 People Injured.” So I went downstairs and looked at the structural supports on the balcony before I could come back up and relax at the after-party.

Bill: You told me you got that in that insurance, right, so we’re fine.

Building Relationships

Andrew: Ah, yeah. Still though, I’m going to put a damper on the closing party. What about you, any other kind of highlights or fun aspects before we get serious and talk about the takeaways?

Bill: I’ve got a number of valuable, you know, business takeaways, but I mean for me it’s building relationships in person. ECF is sort of my mastermind, you know. If I want to know anybody that’s any good at anything, I can find someone at ECF and just to have them all in one room is awesome.

And to have the chance to speak and then have people come up to me afterwards and want to talk about the topic that I’m really interested in, was just a blast because the speakers were so accessible at ECF. I mean, everyone that speaks is a member so as soon as they get done talking, they just kind of walk into the audience and sit in the audience for the next talk. So everybody’s really accessible, which was awesome.

Key Takeaway #1: Amazon Is Changing, Fast

Andrew: So takeaways, why don’t you start, man? What was one of yours that we can kick things off with?

Bill: So, I’ve got four. The first one for me that hit me during a presentation on Amazon Listing Optimization is just how fast the game is changing, especially on Amazon. I had thought our listings were pretty good, and I thought I stay on top of, you know, the algorithm changes and the listing best practices, and sitting in a session with Kevin and Aaron about Amazon optimization, I would have put my listings up against anyone’s.

And then I was like covering my face as I was in the session because I realized that what I thought was good, was terrible. I mean, there are people operating at a ridiculously high level on the Amazon optimization, and stuff that was working six months ago was out of date. Stuff comes out literally weekly as people try to reverse-engineer that Amazon algorithm. So that shocked me, to be in a room with people who I really believe are the best in the world at this stuff, it’s tough to keep up unless you actively try.

Improve These Two Things Now on Your Amazon Listing

Andrew: Was there one or two things that you can kind of remember you jotted down that you were going to be making changes to specific things that you wrote down in terms of how you would improve your listings based on that presentation?

Bill: Yep. So we need to redo all of our listing images. Aaron was showing me listing images with kind of points of difference in seals and bullet points, all that stuff, in the actual image. Now you can’t put it in the primary image without going at the Terms of Service, but in the secondary, tertiary, etc, images, you know, annotating those images sells so much more. And then Carol Rand showed me her A+ Detail Page and it just blew me away, the level of care and design that she had put into the A+ Detail Page. It just indicated to me how high the bar has risen on Amazon.

Key Takeaway #2: Authenticity Is Important

Andrew: Very cool. One of my big takeaways was just the sense that being authentic pays off enormously, especially in 2018. So Michael Jamin from TwirlyGirlShop.com had one of the most popular sessions of the entire event. He is a Hollywood screenwriter. He writes for TV and Hollywood in LA, hilarious guy, and really understands storytelling very well.

And so he walked through just kind of the elements of story and some of his big takeaways were, if you’re going to tell a story you need a hero, an obstacle, and a goal. Most people tell too many stories, but you should focus on one story, and you should focus on your weaknesses, not your strengths, were some of his big, kind of over-arching thoughts from his talk.

But the big things were one, it’s more powerful, obviously. That’s pretty obvious. You know, he really tapped into a lot of things where if you can tell your brand story you resonate so much better with people, but what you wouldn’t suspect is that it’s actually a ton cheaper too. Like he showed a couple examples on Facebook videos they were running.

There was one video that just talked about the brand, and then another one where it really it’s the story behind his brand, and it was 90% cheaper from the CPA, the video that was story-based versus just telling about the company, which I thought was cool. And then Matt and Meredith also had a talk, and they talked about how they really, you know, came out of their shell and instead of trying to be careful and not offend anyone, they got very political with their beliefs with their T-shirt company.

And when they did, their sales just exploded. Especially in Amazon and today’s world in ecommerce, being authentic just pays off enormously.

Bill: It kills me that getting political is the thing that finally got people fired up to buy T-shirts, but I think the unifying point though that I took from Michael’s talk about stories that, instead of obstacle I wrote down, “Every story needs an enemy.” And that’s something I think when we’re telling, you know, feel-good stories on our About Us pages, we tend to forget.

Politics, I mean, is kind of the ultimate disgusting manifestation of that where everybody is the enemy and everybody is throwing mud at anybody, but it’s tribal and it gets people fired up. So I wrote down, “Every story needs an enemy.”

Andrew: Yeah, that’s a great way to look at it too. Bill, what’s your next one?

Key Takeaway #3: Read Traction

Bill: My next one was that I need to actually read the book “Traction,” which has been recommended to me a number of times and I’ve basically read the Cliff Notes of it and thought it seemed good. But in talking with Blair Budlong from Decks Direct and his implementation of the Entrepreneurial Operating System, which is the framework from the book “Traction,” there’s just a lot of depth there that I haven’t really gotten to, and I’ve talked to a number of members who have implemented the Entrepreneurial Operating System and are using it to great effect, particularly when you get kind of north of 10 employees is when it really starts to make sense.

You won’t, I don’t think, see the value of it below that, but once you get above 10 employees you will desperately understand the value of it. So I bought the book on Amazon and I need to actually read it.

Andrew: Yeah, I actually added it to my Goodreads list as well. It’s funny, I had never even heard of “Traction,” you know, a year ago and I feel like every third person or every, you know, every other break-out session I was at somebody was mentioning it. I don’t know if they just wrote it or if it just really blew up this year, but yeah, it seemed to be everywhere.

Bill: I don’t know how old it is but I think it’s that your community is getting bigger and people need it more.

Our Sponsors Were Awesome

Andrew: People, yeah, good point. So I’ve got another takeaway but some of our sponsors I want to thank. We had a really cool, a fantastic group of people who made the event possible. And if you’re in the event world, you know, they are… if you’re looking to make money, events are usually not the way to do it. And the event would not have been possible without these guys, so I want to thank them.

So the first sponsor is Quiet Light Brokerage. Mark Daoust and Joe Valley were at the event and they have been a three-time Gold sponsor of ECF Life and I really feel like they are part of the community now given how long they’ve been with us, the help they’ve given to members. They have talked to a lot of ECF members who have had really solid positive experience with selling their business or buying businesses through Quiet Light Brokerage.

So if you’re not familiar with them, they’re the premier brokerage firm in the space of high six, seven, and eight-figure stores. Fantastic team, highly reputable brokerage firm. Can’t recommend them enough. Mark and Joe, thank you for being such great supporters of the community. It’s been great having you and if you want to get on their list and learn about new listings, or get in touch about potentially selling your business, QuietLightBrokerage.com.

Secondly, Klaviyo, who is also a sponsor of this podcast, was a sponsor of the event. This is their second time sponsoring. If you are listening, you definitely know who Klaviyo is. I gotta meet Brian Whaley who is the Director of Product Management over there, super-nice guy. And a couple cool things on the Klaviyo front was our official staff expert, Jeremy Roberts.

For a little while he was on Klaviyo, he jumped ship and he went over to Mail Chimp for a while to test them out, and just this year made the big announcement that he came back to Klaviyo because he wasn’t happy, Mail Chimp wasn’t as, the grass was greener and he officially switched back over to Klaviyo which was cool to see. So Klaviyo, thank you. We really appreciate you guys sponsoring. You can check them out at Klaviyo.com if you’re not familiar or not using them.

And then finally, 2nd Office, Carlos Silva. He’s been a long-time forum member. He’s got a staff of like over 200 VAs in the Philippines and comes from an ecommerce background, so he knows, he understands like, you know, what store owners like us need from VAs.

Not the cheapest, you know, if you’re looking for like a super-cheap VA, that’s not your guy. But if you want really high-quality VAs that can help with customer support, back-office admin, or contact creation, he’s the guy you should check out. So you can learn more about his company, 2ndOffice.co, and if you’re on the forums in ECF he’s also running specials for the month of February. You can reach out to him at @CarlosSilva to learn about those.

So we have a have a couple more sponsors but I’ll mention them later on. But again, gentlemen, Quietlight, Klaviyo, and 2nd Office, thank you so much.

Key Takeaway #4: Facebook Ads & Mobile

So getting back into the takeaways, I’ll go with one. There was a fantastic session that Mike Jackness and Miracle Wanzo did on Facebook advertising, and two things that really stood out to me from that one were one, was the stat that Mike mentioned early on and that was 88% of ad revenue for Facebook is now on mobile, which I know mobile is big but 88% just blew me away.

So thinking through how you need to target people and also design your creatives for mobile, when people are swiping and have very short attention spans, was something that stood out to me. And the second idea was you really, like Jackness and Miracle are probably two of the people that know Facebook ads better than anyone else that I know of. They’re brilliant, they really understand the space.

And Mike came in and he ran a lot of different campaigns. It was kind of a real-time checkout of Jackness’ Facebook account to see what was working, what’s not because they set up the ad campaign just a week earlier. The differences between the ones that worked and didn’t and the fact that Mike had no idea and was even surprised by what worked really well and what didn’t as he was testing, was fascinating to me.

So just coming away from, sometimes, a lot of times on Facebook you have no idea and you have to throw a lot of stuff at the wall to see what works and find stuff that’s going to pencil out.

Bill: Yep, I totally agree. And the mobile thing continues to throw me for a loop also because you hear it all the time that, you know, Google is making their mobile index the primary index, and all this traffic comes from mobile. But to see those numbers, 88%. To me I just kind of have been thinking, “Oh, mobile is something I’ll get to. It’s kinda good on mobile.”

But it kind of sunk in that if you’re kind of good on mobile that means most, if not almost all people are not experiencing the good version of your website. The good version of your website should be the mobile version, and that’s crazy to me.

Andrew: Yeah, I wonder if we as entrepreneurs, like Bill, you, and I and a lot of people listening spend most of the day, you know, seven or eight hours a day, at a computer, at a desktop, right? And so we’ve got a full keyboard, we’ve got, you know, two or three monitors and so it’s easy for us, and I wonder if, I don’t know if you feel this way, I feel like I don’t. I project what I do to the rest of the world when most people are not using the internet the way I do.

Bill: Yeah, I think our mobile time doesn’t register on our brains because it doesn’t feel like we’re on the computer. I’m like, oh yeah, I’m on the computer for eight hours a day when I’m at the office, but you don’t realize that you’re also on mobile for probably four hours a day interspersed through there and at night and in the morning.

And some of that, a lot of that actually, is reading-email time and clicking through to ecommerce websites. I buy so much stuff on the Amazon app but it doesn’t seem to register because it doesn’t feel like computer time.

Andrew: Yeah, it’s crazy. Anyway, so those are some interesting things that stood out for me. But Bill, what’s your next one?

Key Takeaway #5: Gum Tape Machines

Bill: My next one is that I need to buy a gum-tape machine for our warehouse. I got this from David Corum and he showed me that basically, if you know what these are, the gum-tape machine, they’re used in the Amazon warehouse. You know, when you get a package from Amazon and it has that preprinted Prime tape and there’s kind of that webbing throughout the tape, and it’s really, really hard to just pull off the box.

It’s incredibly more secure, and what you need is this machine that’s about $1,000 so it doesn’t make sense if you’re in a lower-volume warehouse. But in a higher-volume warehouse like ours, it has all these buttons so you just press the “12” button and it shoots out a 12″ strip of tape that’s already moistened and then you just slap it on the box, and it dries like cement. So you need to use less tape than you do with the clear PVC tape.

And you can also get it branded. It’s basically the same cost if you order enough to get your own logos printed on the tape. And the one, I’m trying to remember the model that he recommended was the Better Packaging, I think 585, which is, like I said, about $1,000. You load it up with 1000 feet of tape, and the tape is, I think, marginally more expensive than clear tape, but it’s way better, much more secure, and you also end up using less.

So a lot of people actually save money after switching to gum tape. Some people also call it water-activated tape, but you can find this, the Better Packaging, I think it’s the 585. So I need to buy one of those right away for my warehouse manager.

Andrew: Did you learn about that in the Warehouse and the Shipping break-out session with Jamie and David?

Bill: I did.

Andrew: You did? Okay. In my chops in the warehouse world are nilch, nada. I just have never run a warehouse. But that seemed like one of the most interactive sessions, like Jamie and David did an incredible job. They both have a ton of experience. Jamie just set up her first warehouse and just blew through it in about 12 months with how fast they’re growing. And then David is just like the master.

He won Fueley Award for like hardest working, most efficient guy because he’s designed. It was crazy the level of detail and the extent to which he’s gone to automate his packaging, and his pick and pack and ship methods, like creating his own tools. It just blew me away. That was one of the sessions I saw that was coolest from the interactive standpoint.

Bill: Yeah, he was very impressive, and I won’t reveal how big his business is on the podcast, but it is big. And he does it out of 2,500 sqft, which is insane. And not only does he do it out of 2500 sqft, he sells holiday lights so he does it all in like 90 days out of 2,500 sqft. He’s like got it stacked all the way to the ceiling, like not wasting an inch anywhere, all these custom tools. He’s a total maniac about it.

Incidentally, another thing that I love about ECF is just the weird stuff people will get totally obsessed and good at, you know? Like clearly David has just been in the weeds on optimizing this because, you know, it clicks in his brain and he just, he loves it. And I’m not personally that obsessed with it, but I’m personally obsessed with other things. And so to run into people who are that obsessed with what seems like such a stupid thing like gum tape, that’s one of my favorite things about ECF.

Key Takeaway #6: Focus on Profitability

Andrew: My next takeaway was Jen Geale and Blair Budlong from Decks Direct, and then Mountain Bikes Direct did a session on growing to 10 million and beyond in sales. And two things that I really pulled out of their presentation, their entire presentation, was, from Jen’s especially, was her business really picked up and started doing well when they made the very clear decision, “Are we going to focus on growth, or are we going to focus on profitability?”

And I feel like so many times, even myself included sometimes, if you ask, “Hey, Andrew, where are you trying to go?” I have goals and things I want to do, but I think more people than not, again myself included, sometimes are not crystal-clear on what they’re trying to optimize for, which is one of the reasons I love asking that question to guests.

And when they made the decision, “Hey, we’re going to focus on profitability over growth,” that’s when their business a, got more profitable and b, really started to grow ironically enough. So I thought that was an interesting point.

And the second one from Blair’s side of the talk, that I thought was really cool, was he talked about paying your bills early as a competitive advantage. You know, you go to any finance course, talk to anyone in traditional business, and they’ll say, “Oh, if you have net 90-day terms, wait until day 89 and then pay your bills, because you push those payments out, you increase your cash flow, etc, etc.”

And I’ve always hated that. I hate having money in the bank that I owe to people even if I, you know, it gives me a little extra cash flow. I like the idea of, a lot of people make fun of me for this and you probably will too, Bill, but like, if I have a big tax bill due and I don’t have to pay it for six months, I’ll write the check because I don’t want money in my bank account that is not mine. I hate that feeling.

But the flip side of that is that you really, with your suppliers, you can really build up a lot of good will paying on time, which I thought was very cool and something that helped Blair and his company as they’ve been growing. So.

Bill: And the corollary to that actually is if you want to pay on time and you’re crazy like Andrew Youderian and don’t like to use any debt, you should at the very least negotiate an early-pay discount. If you’re going to pay on time, up front, if they were willing to extend you net 30 or 60, you should ask for 1 to 2% of a discount for paying early.

Andrew: Yeah, good point, because you usually get one.

Bill: And I was going to say, my other takeaway from that, from the session with Jen and Blair from Decks Direct and Mountain Bikes Direct is that if you want your store to grow to 10 million, just add “Direct” to the end of the name.

Key Takeaway #7: Commercial Real Estate as an Investment

Bill: My next one was from the Investing session with Shakil and especially with Craig Gentry. Craig talked about commercial real estate, and real estate is something I have been interested in for a while. And Craig gave just a knock-down presentation about how to invest in commercial real estate, essentially for a beginner, you know, for someone that’s wanting to invest in and not run commercial real estate because those are two very different things. You know, if you’re trying to do it as a side project versus this is your main career.

His primary takeaway was never buy for appreciation. Always buy for cash flow. And he had some really interesting tools to model out, you know, how exactly you can predict what you’ll make from a building before you can buy it, and then thus what you can afford to pay for it, lease terms, you know. He also recommended a few good books, and investing in commercial real estate is something that I’ve been interested in doing for a while.

So Craig’s talk was very, very timely, and some of the rates of return he has been able to get in commercial real estate, as far as a cash-on-cash basis, just straight cash flows, his monthly profit versus the principle that he invested, I mean, I think they were in the mid 20s on some longterm leases. And then also just the operational best practices that he had to manage it.

I think he has something like 20 or 25 houses and apartments in the college town in which he lives, and he’s got a fulltime property manager, and just the process by which he rents to all these students, you know, kind of works them through a process. He already knows they’re going to get in a fight so he already had a process for how you get someone out of the lease if there’s a fight. He tells them up front.

The level of systematization that we often think about as far as ecommerce businesses with standard operating procedures, Craig had brought to commercial real estate and being a landlord. So I found the applicability of a lot of the same mental tools that we all use in ecommerce, it was fascinating to see them brought to something very different, like commercial real estate.

Andrew: Very cool. So is it safe to say you’re going to be starting CommercialRealEstateDirect.com in near future now?

Bill: That’s right. Exactly. Exactly. I can’t miss, can’t miss.

Key Takeaway #8: Do Less, Strategize More

Andrew: My next takeaway actually comes from you, Bill, and we touched on your talk at the very top. But for me, you know, I don’t necessarily aspire. We have kind of different philosophies as anyone who’s listened to us, you know, on this show over the years has, you know, probably will notice pretty quickly.

You definitely are focused more on growing something, especially with a bigger team, and even though I don’t necessarily, you know, have quite the same thoughts on going down that track, I’ve realized coming out of your presentation that I am not leveraging enough people and probably doing way too much myself. I mean, you talked about building a team and what the CEO’s focus really should be, and the CEO’s focus should be strategy and vision and hiring.

Since I got back, I built up a spreadsheet of things that I should not be doing, and putting that down there and probably at least two or three times a day, something pops up where I think, “Why in the world am I doing this?”

And I’m writing it down with the goal of spending probably two or three or four weeks in a big chunk and then on a regular basis going forward of building out a team, even if it’s a more robust team of contractors, because I need to spend more time on the strategy and the vision, as opposed to some of the stuff that I’m doing in the weeds to get stuff done.

Bill: That’s awesome. I’m glad there was a takeaway from my talk. Yeah, the tip that I usually give to people who kind of say, “I know I want to be working less in the business and I should be doing strategy and hiring but I don’t really know how to get out from the middle.” I have people keep a task diary, so you just write down every day just what you do, and don’t do anything else besides that for kind of two weeks, and then go back through the diaries and anything that shows up more than once is something you shouldn’t be doing.

Andrew: Yeah, totally, totally helpful, and I’ve got a list that’s embarrassingly far too long based on all of that, that I’ve got to start taking care of.

Bill: Well, that’s interesting to me because you’re very good with SOPs and to-do lists and out-sourcing. I mean, I’ve seen you down at Frip. You’ve got this Word document system where you hammer it all out, and you’ve got a number of VAs. I actually think your personality is very good at this. So I’m interested to hear you say that you don’t think you are very good at this.

Andrew: Yeah, well I don’t think I’m terrible at it. There’s a lot of stuff that I get off my desk or off my plate and systematize, but I think there are some, I think as you start to grow and you aspire to get bigger, which I do, I think there are somethings where I feel like things that I have traditionally done, that only I can do, that I can’t outsource, I’m kind of stuck.

Like for example, like right now I’m going through and hammering out the State of the Merchant Survey and crunching all the data and getting ready to write the post, and it’s going to be like a week-long process. It’s just a hairy task, and for me there’s no reason that I can’t hire some smart people to go through, pull out the key insights, give them to me, coordinate with our graphic designer, and have me be able to come in and write the copy for it after a review of it and save myself, you know, let’s say, 15 to 25 hours, things like that.

Bill: I would suggest that you might not even be looking at it on an abstract enough basis, and this was kind of the crux of my talk It was that everybody tends to try to use contractors and outsourcers for everything but kind of a trap there is in order to use an outsourcer for something you have to take a bunch of time out of your day to write the SOP, hire the right contractor, interview them monop work, etc.

But if you have a fulltime or even a parttime in-person employee that comes into your office and twiddles their thumbs, asking you for stuff to do, it’s so much easier to train them on something that I actually have my employees write their own SOPs. So they can watch you do it once over the shoulder, and then they kind of attempt to do it in real time, and they can just bug you if they get lost. And before you know it they’re just doing it.

I’ve found that much more powerful because you don’t need to carve out the time as an executive to write an SOP, hire a new VA or train your existing BA, check their work, you know, wait. You have a day of lag time because of the time zone. I mean, you heard the talk. I’m just really high on in-person American or, it doesn’t have to be American, wherever you’re based, in the same building as you, speaking the same language as you, in the same time zone as you.

This has been transformative for me as far as the speed of iteration, fewer cycles. So I think you should try it. You’ve got a lot of people that need work in Bozeman, I’m sure. You could make them ride around with you in the Westphalia van, just in the back.

Andrew: Okay, that would never do. You get two people in an office, it’s hard enough. You get two people in, you know, a 10 sqft office and we’d probably last about three days before we got into a cage match fight, I’m guessing.

Bill: Can you imagine on their first day of work you just pull up in the Westphalia and you’re like, “Here we are. Welcome to work.”

Andrew: They’d last two hours and then quit. So, I love it though. We’ll have to do a little funny webisode on that.

Our Other Awesome Sponsors

A couple more shout-outs to two more sponsors that made it possible. One was Shoelace, and at Shoelace, if you’re not familiar with them, they plug into your Shopify store and they make the process of retargeting your ads on Facebook or Instagram incredibly easy. It is like hiring a real focused agency, but for a fraction of the cost.

So a lot of the things like varying up your ad creative or building out lots of campaigns to split-test, they do a lot of the heavy lifting on that to either totally automate or streamline that process. David and Florent were the two reps from Shoelace. David’s the co-founder over there, and they came out.

They wanted me to tell everyone at ECF that they had a huge amount of respect for the community and are grateful they got to hang out with us and really enjoyed getting to know everyone at Laguna Beach. So, Shoelace, David Florent, thank you, guys. And if you’re not using them and on Shopify, give them a test drive. You can get two weeks for free at Shoelace.com.

And then finally, Zipify Apps was our fifth sponsor, and Ashley and her team from Zipify came out and they also sponsored drinks on Friday night at the Rooftop Bar, so thank you, Zipify. If you don’t know Zipify, that’s actually Ezra Firestone’s company where their whole mission is to help you get more from your Shopify store, and they do that through an integrated up-sell app for Shopify, plus a custom-landing page builder so you can really convert more of the leads that you drive down.

So, they’ve got exclusive discounts for attendees, and if you’re listening right now, for about a week after this airs. And that includes both the software that I mentioned as well as a bunch of discounts on Ezra’s email marketing, Facebook ads and other training courses, and you can get hooked up with all of those discounts at SmartMarketer.com/eCommerceFuel18. I’ll link up to all of those things in the show notes.

So, sponsors, thank you guys so much for making the event possible. Bill, do you have a final takeaway?

Bill: I had four, so that was all of them.

Final Takeaway: Maybe We Don’t Understand What’s Driving Us

Andrew: Cool. So my last takeaway, this kind of comes from Kevin Stecko’s talk. And Kevin gave a really interesting talk on the mistakes he’s made over almost 20 years in business. And the biggest thing, he had a lot of interesting takeaways, the biggest one I took from his talk, though, was sometimes we don’t really understand what’s driving us.

And he talked a lot at the end about how for a while a big part of him wanting to build a big business was wanting to prove himself. You know, he talked about being in high school and being on the basketball team and not getting a ton of playing time, which is something that I, you know, relate to. I played basketball in high school, good enough to make the team, not good enough to start or play a ton.

And feeling like, you know, he wanted to have that point and business was something he could really cure that. And he wanted to be able to build something big, almost for ego’s sake. He didn’t want to hire people smarter than himself because he wanted to be the guy really in charge of driving the ship.

It took him a while to realize that was even happening, and then when he did he realized it wasn’t that important and started optimizing the business for other things, but that that mindset made him make decisions that really were not in the best interest of the company.

And I think that’s something that I like to think that I’m immune to that, like I like to think that I’m this very independent guy that really isn’t beholden to opinions of other people, but I think that’s easier said than done, even for people who have, you know, a fairly strong independent streak. And I know like, Bill, when we go out to Frip, that meet-up we have, that is one of my favorite times of the whole year, hanging out with you guys and having just masterminding and talking and building friendships.

But sometimes I come back from that and I’m really fired up, but sometimes I also come back from that and I’m like, “What am I doing with my life?” Like all these amazing guys are doing incredible things and I feel like I need to do more. And so I think there’s a good balance between really wanting to grow and improve and make sure you reach your potential, but also make sure you’re doing it for the right reasons.

Bill: You know, I think fear of hiring people smarter than you holds a lot of entrepreneurs back because people who are smarter than you are two things a, smarter than you and b, expensive. Yes? And those are both things that the amateur entrepreneur or amateur CEO to use a different term that I don’t think people view themselves as enough, the amateur CEO will be afraid of hiring people who are smarter than them and people who are expensive.

But those people are expensive for a reason because they’re better than you. And I’ve hired a number of people. I mean, really everyone in my company is better than me at the thing that they do. And so now our company as a whole is first-class in everything we do, whereas when I was doing everything, we were B-level, you know, kind of utility-player level at everything we did.

Andrew: Yeah. Part of that, too, I think that definitely is part of an ego part of that and a little bit of a fear, but part of it also is you, the stakes are higher, right? Like if you get someone smarter than you, they are more expensive than you, and so you have less margin for error. If you allocate a VA to do something for six months and it doesn’t work out, well, maybe you lost, you know, $3,000 or $4,000.

You allocate like somebody who comes from the C-Suite doing something or someone who’s a world-class marketer and they’re costing you $115,000 a year for six months and it’s not the right thing to be working on, there’s $60,000 out the window.

Bill: Yep, that is true. Yeah. But at the same time, you got to take risks to get payoffs. I know everyone understands that. There’s a saying that I love, which is that everything you’ve ever wanted is just outside of your comfort zone, which I have found very personally true.

The Future of ECF Live

Andrew: Yeah. I’d agree with that too. So, those are big takeaways. Bill, next year some of the things that maybe we’re thinking about doing for next year, what improvements to make. Returning to the Surf & Sand, that was one of the big things that everyone, you know, on day two before the conference even ended, everyone was like, “Are we coming back here? Is this going to be the permanent venue?”

And as tempting as it would be, especially for me being kind of closer on the West Coast, I think I would love to make that our permanent West Coast location, but I do think because it is fun to go different places every year and also for the sake of the East Coasters as well to be able to find. If we could find a venue as cool as the Surf & Sand on the East Coast, especially, you know, maybe Florida or along the Gulf, somewhere really warm, that we could bounce back and forth between, I think that would be ideal.

Bill: I think that would. I mean, the Surf & Sand was fantastic. The temptation, especially when you’re there overlooking the ocean on a gorgeous day, is to say, “Why would we ever go anywhere but here?” But another member made a point to me that they really enjoy the fact that the conference bounces around and, you know, is closer to different members different years so you get a little bit of a different roster, but also you get the flavor of different parts of the country.

So I do see it both ways, which is why I’ve been trying to talk you into having it twice a year, one on the East Coast, or maybe one at Surf & Sand and one roving around. But you don’t like to make money, so you won’t do that.

Andrew: Oh man, we keep almost being on the edge of doing two per year, but one thing we were thinking about…and I think, there’s a good chance at some point we will but, man, doing one of these events, it takes up the better part of a six-month chunk of time, especially in terms of headspace, and once we start doing two there’s no going back.

And as much as I would love to, then you commit pretty much year around to planning events, which is not a bad thing but it’s just, I want to make sure we’re ready for it and have the band-width to do it really well. Because I’d much rather do one, you know, one event as well as I could per year than have two that were a little bit subpar. So…

Bill: Yeah. It does seem like it would be easier, though, if you, say, weren’t doing everything yourself. I mean, if you hired some people.

Andrew: If only someone would give like a talk about that and could guide me and give me some kind of pointers.

Bill: Yeah. Although I was very impressed, the closing party at ECF Live this year was on the beach and there was music and overhead lights and a delicious fish taco station, make your own fish tacos. It was just an incredible party, and I said to Andrew, I said to you afterwards. I said, “Andrew, where did you get the food? Those fish tacos were incredible.” And he goes, “I don’t even know. Lauren handled it.” And I was very proud of you.

The Ladies That Look Alike and Plan Alike

Andrew: Well, thanks. You should be proud of Lauren. Speaking of Lauren, Laura Serino is our community manager and Lauren Caselli is an Events Coordinator that came in to help us this year with the event, a true professional, and those two women did just a phenomenal job with this event. So I wish I could take credit for, you know, for everything they did, but they were the reason everything was as top-notch as it was and flowed as fluidly as it did. So, Laura and Lauren, thank you both for the incredible work that you guys did on that event. It was amazing.

One thing that you mentioned, Bill, I thought about and I heard from other people too, was, I think next year we’re going to make this a three-day event. Right now it’s an opening party, two full days, and then everyone goes home. I think next year we’re going to make it three days because especially given how far people come, especially if we’re, until we start doing it two times per year, it just makes more sense to do it three days.

And then plus, for me, the presentations are always, you know, you always get a lot out of them but the networking, connecting with people, just keeping everyone’s spot, that probably is… I think probably what people get the most out of any event, and particularly this event, is just that time to connect with people. And so I think we’re going to do three days the next time we do this, to be able to bake in more time for events, bonding, networking, connecting, all that kind of stuff.

Bill: Couldn’t agree more. And everybody including me felt like we were being forced to leave, you know, halfway through the ballgame after the second day. It was just so much fun. So I could see, you know, two days of keynotes was enough, but I could see maybe a third day of a little bit less structure. I mean, I don’t think you want just people bumming around, but some sort of more lightly programmed third day, but that gives people a reason to stay, and, you know, I don’t know, maybe you stick…

If you don’t lightly program it, people might skip the last day. But I think I would put the closing party at the end of the last day and then people will stay for the whole time.

Andrew: Yeah. Or even, I can’t remember, this might have been your recommendation, even have all the sessions in the morning when you’re fresh and your mind is sharp, have lunch, and then in the afternoon do stuff that’s more casual. We did a surfing, everyone got together. Probably 20 or 25 people that came together and all went out surfing together. And that was, in terms of feedback, people loved that.

I wished I could have gone. I couldn’t for some logistical reasons, but more things like that. So have the afternoons where you’re really getting together with people, maybe small just very small conversations or events like that I think in the afternoons would be cool.

Bill: Yeah, that would be awesome. So you’ve just got morning of academics every day and afternoon of socializing. That would be great.

Just The Right Size

Andrew: Yeah, exactly. Anything else you think… Oh, one thing was the size of the conference. So we’ve gone from I think the first ECF Live I think was about 60, second was about, you know, 75 or 80, third year was about 115, and this year we were right at I think 140ish or 150ish. And keeping the size small I think is going to be increasingly a challenge to do, but I think that’s pretty important going forward.

Bill: Yeah, I mean I thought 150, interestingly I didn’t think 150 felt much bigger than I think you had 110 or something last year?

Andrew: I think it was actually 120ish or 125ish.

Bill: Well, I was going to say I barely noticed the difference at all. So I thought 150 was good. I mean if you let it get, at some point there’s an upper bound, right, where it starts to feel big. I think you could even go on to 175 and, you know, I would just inch it up a little bit each year.

Andrew: One thing that’s nice is the longer you have it, the more you stretch out the size, the more time people have to know each other from previous meetings, so it’s easier to connect right away. You feel like you know more, you don’t have to meet 175 new people. You can meet 40 new people as opposed to trying to do the whole group.

Bill: And if you do three days instead of two, you got more time.

Andrew: Exactly. Yeah. So I hope we find some tweaks to make for next year but Bill, Amen. I appreciate you being one of those original gangsters to come all four years, coming back to keynote again, hosting the closing party in your hotel room and putting your, you know, credit card deposit on the line. Fun is always hanging out, and thanks for coming and making it a great event.

Bill: Glad to do it.

Andrew: That’s going to do it for this week’s episode, but if you enjoyed what you heard, check us out at eCommerceFuel.com where you will find a private vetted community for online store owners. So what makes us different from other online communities or forums is that we heavily vet everyone who joins to make sure that they have a meaningful experience to contribute to the broader conversation.

Everyone who we accept has to be doing at least a quarter million dollars in annual sales on their store, and our average member does seven figures plus in sales via their business. And so if that sounds interesting to you, if you want to get, you know, with a group of experienced store owners online, check us out at eCommerceFuel.com where you can learn more about membership as well as apply.

And I have to again thank our sponsors who helped make this show possible, Klaviyo who makes email segmentation easy and powerful. The cool thing about Klaviyo is they pull in your entire catalog, customer, and sales history to help you build out incredibly powerful automated segments that make you money on autopilot. If you’re not using them, check them out and try them for free at Klaviyo.com.

And finally, Liquid Web. If you’re on WooCommerce, if you’re thinking about getting on WooCommerce, Liquid Web is the absolute best hosting platform for three reasons. One, it’s built from the ground up for WooCommerce and optimized by some of the best industry professionals in the WooCommerce or Word Press space.

They really know the stuff, and it’s highly elastic and scalable, as well as comes with a whole suite of tools and performance tests to optimize your store. You can check them out and learn more about their hosted WooCommerce offering at eCommerceTool.com/Liquid Web.

Thanks so much for listening. We really appreciate you tuning in, and looking forward to talking to you again next Friday.

Do you want to connect with and learn from other proven ecommerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight-knit vetted group for store owners with at least a quarter million dollars in annual sales. You can learn more and apply for membership at eCommerceFuel.com. Thanks so much for listening, and I’m looking forward to seeing you again next time.

Shopping cart month continues and here in our second installment, we take a look at the one and only Magento. Magento continues to be a cart used by store owners in our community, known for its robust tools and enterprise level capabilities. This week, we’re talking with Alan Marek, a Magento expert and store owner [...]

Shopping cart month continues and here in our second installment, we take a look at the one and only Magento.

Magento continues to be a cart used by store owners in our community, known for its robust tools and enterprise level capabilities.

This week, we’re talking with Alan Marek, a Magento expert and store owner in our community and Kalen Jordan from the podcast Mage Talk to find out what they’re loving, and what could be improved upon, with Magento.

Andrew: Welcome to the eCommerceFuel Podcast, the show dedicated to helping high six and seven-figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow ecommerce entrepreneur, Andrew Youderian.

Hey, guys, Andrew here. Welcome to The eCommerceFuel Podcast, and welcome back to shopping cart month. Our first ever shopping cart month here on the show, possibly, possibly anywhere. I don’t know. I’ll do a google search for shopping cart month. I’m guessing it’s not a highly searched term online. I could be wrong, but I’m excited to be here. It’s how you know you’re a true ecommerce geek because if this gets you excited.

We did Shopify to kick things off, given it’s probably the most, well, it is the most popular platform in our community based on usage. And this week we’re diving into Magento, the second most popular one, just by a tiny razor’s hair. WooCommerce is just right behind it, but Magento is in the number two spot right now.

To talk about Magento, I’ve got Alan Marek, who’s our in-house Magento expert in the private community, as well as Kalen Jordan, who is someone who has a lot of experience in the space and also is the host of the MageTalk Podcast. So both these guys really, really know their stuff. A little bit of context before, so I mentioned Magento is the number two store. And if you look at it, the number of store owners using it.

We have about a thousand-ish members in the community. And there’s 81 store owners as of the beginning of, you know, right around the beginning of 2018, using Magento, which is, you know, 8%-ish of all of our members compared to over 40%-ish of Shopify, which is just staggering, the dominance that Shopify has in terms of just the next best competitor being a fifth of their adoption, which is just wild.

So Magento is rated a 3.8 out of 5 stars. And, you know, there’s actually a cart that I’ll link up to post on this. I actually migrated away from Magento. This is a number of years ago. This must, oh, what, oh, maybe three plus years ago now. And the big reason I migrated away was complexity. And that’s something we start talking about and getting into in today’s show. So, anyway, excited to dig into it with a couple guys who really know their stuff on the Magento platform.

But before we jump in that discussion, we wanna thank our two sponsors, who help make this show possible, first, Klaviyo who makes email automation easy and powerful. And by now, you probably know their killer feature is just the ability to create insanely targeted segmented email flows that go out to your customers day in and day out. And you can really pick by, you can create flows just about anything you could think of from what products people have purchased to if they’re VIPs or not based on their purchase history, is pretty powerful.

They also have Facebook integration. So you could sync up your Klaviyo data with your Facebook data and be able to, you know, do a cool targeting to people on Facebook based on the segments you create. They’ve got great internal reporting to let you know what flows are working, to make sure your deliverability and all your kind of campaign-wide stats are up to snuff and an email builder that helps you make emails that don’t look like they came out of 2002 with limited pain and suffering. So, if you’re not using them, you can check them out, the free trial at Klaviyo.com.

And secondly, I wanna thank the team over at Liquid Web who’s now offering complete managed hosting for WooCommerce. And if you’re on WooCommerce right now or after listening to shopping cart month, you decide you wanna head that direction, you’re gonna be really hard-pressed to find a better rock-solid platform to host your store on. They’ve got a world-class team over there led by Chris Lema, who is well-known.

If you’re in the WordPress or the WooCommerce space, you know him. They’ve really geeked out about, in the best possible way, about optimizing their hosting to make your WooStore run incredibly well.

In addition, they’ve got a bunch of data sets, really cool data sets that simulate different scenarios. Maybe it’s 500 people coming to your store concurrently. Maybe it’s 15 people trying to use the same coupon code concurrently, where they can identify potential weak points in WooCommerce, And you can stress test your store ahead of time to make sure it’s working. Pretty cool stuff. So if you wanna check get them out, learn more about their offering, you can do that at ecommercefuel.com/liquid web.

All right, let’s go ahead and get into today’s discussion.

Our Perspective of Magento in 2018

Andrew: Guys, I’d love to share my perspective on where I kinda see Magento in 2018. And get your thoughts on if you think it’s a fair perspective, if you think it’s accurate, or if you think I’m a little bit off base. This is something I’ve been doing kinda, to kick off all of these episodes on different shopping carts. And from my perspective, I feel like Magento is kind of in a little bit of a slow decline. It used to be, you know, maybe three, four, five years ago, the most popular self-hosted cart. I remember when I came to it from Zen cart. I’m really being myself here.

But it was the new, sexy, amazing girl at the dance. It had, you know, faceted navigation on the left-hand side blew me away. But as I was on it for a while, just the complexity really, we can get into this in more depth, but just to simplify the complexity and difficulty of customizing it, of maintaining it for a guy who didn’t have a full-time developer became just a beast. And I saw Shopify as a more compelling option because I didn’t need to, you know, for me, didn’t need to customize it to the ninth degree. I wanted the simplicity of the hosting, self-hosted.

And I kind of see, you know, kind of WooCommerce potentially sliding in as a more viable option for, you know, maybe those store owners in the high six, low to even mid seven figures range or even higher potentially, so it’s still definitely an option, especially if you need a really powerful cart, if you need something that you have to, you know, customization is hugely important, but not the no-brainer it was for people who wanted to self-host four or five years ago. Do you think it’s fair or do you think I’m off-base, sir?

Not In The Decline

Kalen: I would say that, I think that it, you know, when you look at Magento as a whole, like obviously, your perspective, your audience is that’s a six-figure, low seven-figure. And I’m sure there’s a segment for which it’s in decline, right. The question is just what is that segment. When I look at that statement, I think overall, definitely not in a decline, like definitely growing, like they did some studies recently on, you know, their gross merchandising volume.

They’re at 124 billion, gonna go to 220. I mean, those are studies they’ve commissioned themselves. But there’s, I think, there’s a lot of growth in different… I think it’s about what segment you’re looking at. So they’ve definitely made a strategic move kind of up to mid-market. There’s B2B. There’s everything. So I think it really depends on kind of what segment you’re looking at.

Getting the Mid-Market Audience

Andrew: And when you say mid-market, where would you say mid-market starts in terms of revenue?

Kalen: You know, it’s funny. We make fun of this all the time. When they say the word mid-market is, I don’t know how clearly defined it is. Maybe, is it 5 million and up, 10 million, somewhere 20, 25, somewhere in there. And at the end of the day, it doesn’t always come down neatly into revenue bands, like it’s more so about what’s the complexity of your business, what are your sort of ambitions for international expansion, you know, things for the Shopify.

You might start to run into pain points around multi-currency, multi-store, those types of things. So it’s somewhere in there, mid-market. It has some elusive position there. But I think, you know, that’s sort of what it comes down to.

Alan’s Take: Lacking Hosted Cart Perks

Andrew: So, Alan, you kind of come from a similar background as I do. You own a Magento store. You’re our community, you know, the ECF Magento expert, and kind of have a, you probably share more of a background than, you know, a similar background to myself. Do you think my perspective kind of at the top there was fair or not so fair?

Alan: Yeah, I think that perspective is fair. Over the past three or four years, there’s been just an explosion, and the hosted carts like Shopify, the. AmeriCommerce is coming back, and you have big commerce. Those hosted carts are taking…I feel like taking a lot of market from the small businesses, the ones that just need pretty simple solution. They just need to, you know, get 10, 20, 30, 40 products up. With those solutions, you can open an account with Shopify and be selling in one day. You just really can’t do that with Magento.

When you look at Enterprise customers and kind of special use cases, people who need some special functionality, I think that market, that segment is growing. I mean, I don’t know the exact numbers on that, but there’s still, from an Enterprise and B2B perspective, there’s still a lot that the hosted carts are missing out on. There’s still a lot of gaps in functionality that they just haven’t developed out yet.

The Growth Potential for Magento

Andrew: Yeah, Kalen, I’d love to dig into your answer a little bit more because I think you have between the three of us probably the more unique perspective because you’re not seeing…you know, you’re seeing more potential there. Who do you see Magento being a great cart for, you know, in 2018? Is it someone doing, you know, maybe 10 million and above with a very specific, that needs to customize completely or own their own data and need something a little more built out than maybe WooCommerce or what is it that you see? Where do you see that growth really happening primarily?

Kalen: Yeah. I mean so I think that, you know, it comes down to, like, you know, when you start to running, you’ve got different things. You’ve got people that are on Magento 1, thinking about going to Magento two, thinking about going to other platforms. They’re familiar with Magento and the ecosystem. So the question for them is a little different than somebody. If you’re just starting out, you wannna sell some t-shirts, like Shopify is the definite no brainer, whereas, seven, eight years ago, maybe Magento was the no brainer.

I think that you can look at, you know, types of…I mean, automotive is an interesting example because you get into really large catalogs with lots of attributes, and I think you run into attribute limits in Shopify, different types of limits on your catalog complexity. So I think that’s an interesting. You know, you could look industry by industry, because I don’t know that much about Shopify, I think that…and the other host is SaaS, I think really the question is when you start to run into limitations in those platforms, you probably then wanna consider whether it makes sense to look elsewhere.

Again, if you’re looking at multi, I think to my understanding, Shopify really hasn’t cracked multi-store as far as, I mean, I know they’ll stand up multiple stores for you, and there’s some things in place to sync up currencies and stuff, but that’s probably 1 of the big gaps. I think a lot of the stuff that, you know, Magento is really pushing B2B, I think is an interesting segment. There’s some interest in there for around content management and staging. You know, I think it just varies a lot by the complexity of the, of the merchant.

Did eBay Help or Hurt or Magento

Andrew: I wanna move on to ownership, guys. eBay purchased Magento back in like 2011, which, man, I can’t believe it’s been that long. They owned it for a while. And then eBay was, you know, kind of more or less broken up in some regard. People all got spun off. I think Magento along with that or at least close to the same time was sold to a private equity firm.

Has that been good or bad for Magento? Has things changed given the ownership? Is it a good place that they’re owned by a private equity firm versus eBay, which is maybe a bigger company, they have more resources, but they’re more split in their focus, any thoughts on their current ownership?

Kalen: Yeah, I mean, like my… And by the way, like I’m pretty…because I’ve never been an official partner of Magento or anything, and so I’ll criticize them like, you know, I’m super independent, like when my thing, I believe that it’s been good. I kind of see them going back to their roots with like valuing the community contribution. I think with eBay, they were sort of a little hamstrung, big corporation, like I knew people that were talking to them about getting hired, like smart people that would have been good hires.

And they had weird hiring freezes and stuff like that. They’ve been hiring, snatching up a bunch of great talent recently, actually to the point where a lot of partners are getting a little upset because they’re trying to get like…they’re trying to get a little bit more of the pie. I think also the premiere, the private equity firm is pushing them in the SaaS direction. So they have a cloud offer. Obviously, they try to do Magento Go back in the day that didn’t go so well.

They’re pushing cloud really heavily. You know, some people will say really the strength of Magento is to be self-hosted and things like that, like the cloud is a little bit of a interesting thing because they’re not doing the cloud themselves. They have a partner, which is Platform SH that they’re kind of integrating with. So some people say it’s a little funny what’s going on with the cloud situation.

I’m sure private equity is pushing for that because it’s gonna get their valuation up. Also you have to assume that if you’re owned by private equity, there’s gonna be another sale event happening, you know, three, four, five, six, seven year time frame. You know, that’s not necessarily something that we’ll be excited about. Those are some of my thoughts.

Partnering with Platform SH

Andrew: Yes. So are they, and maybe on a cloud-based front, is that just gonna be an option kind of like Magento Go? Gosh, I was kind of being cheeky there. Sorry, I didn’t mean to throw you off. But Magento Go was kind of a rough. They’re a SaaS trusted version. I just did not take off, this is years ago.

Kalen: It’s just interesting because, you know, they have certain strengths in terms of the… You know, there was some obvious innovation there with the core product and things like that. But then, you know, they’re not a SaaS Company, like they’re not a Shopify, and so there’s just different expertise, different… You know, getting response times on critical issues in the order of minutes from them directly is like they’re more in the order of weeks, like even if you’re Enterprise support, right? And so they’re partnered with Platform SH.

I think Platform SH has a pretty strong reputation and stuff like that. You know, I think it’ll be interesting to see how…but, yeah, it’s basically, there’s an Enterprise pricing option, which I don’t really know. It’s one of those you gotta call, talk to a sales person to get the price. I think you’re probably looking at like $5,000 a month and up. They also have a lower priced version. You can get started, I wanna say $1,500, 2 grand a month, so similar pricing to Shopify plus. So they have a few price tiers there.

Alan: Kind of interesting because it’s kind of the same thing that AmeriCommerce is going through right now. They were owned by Capital One, and they just broke away a couple weeks ago. So it’ll be interesting to see how Magento and AmeriCommerce and Shopify position themselves in the next couple years.

Andrew: Yeah, it’ll be really interesting. And actually, I just spoke with the founder of AmeriCommerce this morning and we’ll have, kind of in the last episode of Shopping Cart month we’ll be talking to him, but it’s cool because it’s interesting, because they’re an interesting, really interesting company that broke away, became independent just like Magento.

Magento 1.x Versus 2: A Store Owners Take

Andrew: Alan, I’d love to ask you about Magento, too, get a storeowners’ perspective. So Magento one, you know, was kind of 1.X, was kind of the legacy framework. And then Magento 2 kind of represented this entire refactoring, you know, the entire code base and moving to a new platform. And I wanna get to the, you know, maybe some of the aspects of it. Is it better? What problems does it solve? But maybe is it just a good lead-in question is, Alan, have you migrated, like did…are you making the jump to Magento 2 completely replatforming or are you sticking with 1.X?

Alan: I am actually sticking with 1.x right now. So all the information I have on Magento 2 is basically based off of the marketing notes of what’s supposed to be better, but essentially Magento 2 is a…

Kalen: All the marketing copy is true. It’s all 100% true.

Alan: Yeah, so basically Magento 2 as a revamp of the code base, a lot of user experience improvements in the administration panel. I think they fixed their checkout process, made it a little bit more user-friendly, a little bit more focused on B2B and whatnot. But as far as migrating to Magento 2, it’s more of a re-platform than an actual upgrade. So if you’re already established on Magento 1, it’s very expensive project to undertake.

So I plan on sticking it out on Magento 1 as long as I can. I believe Magento has even come out and said that they’ll give it 18 months heads up when they’ll discontinue support for Magento 1, and that hasn’t happened yet. So there’s at least about an 18-month runway going with that.

A Developer’s Take on Magento 2

Andrew: Kalen, have you, on Magento 2, from your perspective, do you see it as a… Your joke about the marketing being, you know, totally true. Do you see it as a pretty big improvement, like are they solving major big problems? Is it a significantly better platform or is it…maybe the marketing is over-hyped like you were alluding to?

Kalen: Okay, so a couple things. So on the open sour-, you know, Community Edition renamed to Open Source. On the open source side of things feature wise, probably not a lot of a big feature improvements from 1 to 2, like Alan was saying your admin is cleaned up, you know, check out. There’s some things that are cleaned up. From a developer facing, do you guys have much of a developer audience or is it really merchants? I get the sense it’s merchants.

Andrew: I’d say mostly merchants, but we definitely have, you know, maybe 10%. I’m guessing, but, yeah, we have some developers for sure.

Kalen: So like from a developer facing standpoint, there’s a lot of stuff architecturally they cleaned up. A lot of the guys I talked to and gals that are doing Magento 2 development, they say, “Man, I could never imagine doing Magento 1 again,” just in terms of tooling and all that kind of stuff. From a feature perspective, like not much, and by the way, like even when Magento started to push Magento 2, all the partners started to push it, everybody.

I even would say on record like I’m not sure the case is there to migrate just yet. At one point, they had November 2018 as their official end-of-life. And I came out and I said like, “I don’t see people moving off it.” I know smart people on Magento 1, they’re gonna stick around. They ended up pushing it out further. I think it’s 2020 or like Alan said, it’s like a roll that will give you 18 months’ notice.

On, the Enterprise side of things, there are some things I do see people excited about. There is a B2B feature set that’s baked in that got launched recently. And then there’s a, they made an acquis-, they’re a little bit acquisition happy. So they made an acquisition of an extension called blue foot, which was some really interesting content management. So it makes it easy to manage content on your product pages, you know, all over the site in a really integrated way. So they’ve brought that into the core, and then things like staging.

So, for example, if you need a stage content roll outs across for a holiday thing or a promotion across products and discounts and homepage and landing category pages, there’s some interesting stuff there. So those are the features that I see people, you know, pretty interested in as far as like business facing features, but those are really more on the Enterprise side.

Open Source & Enterprise: Magento’s Two Flavors

Andrew: You mentioned, you know, one thing I probably should explain that up top. If you’re familiar with Magento, you probably know this. If you’re not, there’s kind of two flavors. There’s what we used to be called Community Edition now called Open Source Edition. It’s just totally free. You know, you download for free, Open Source, but there’s no support. And then there’s the Enterprise Edition, which is a license fee, and you largely, I think, just get support for it. It’s priced fairly aggressively, like Kalen was mentioning.

Back in the day when I was using this, it was number of years ago, I was on a community. It was patched decently. There’s no support. Even the documentation was pretty sparse. I remember more often than not, if I had a question, I couldn’t get it from the official documentation. I’d be more likely to get an answer from the forms. Can you guys give me a sense of how well is, especially with it now being owned by a private equity company, which, you know, obviously is in it to make some money versus just the love of Open Source software.

How is the support for community or for Open Source, I guess, edition versus Enterprise right now?

Kalen: I mean, my…and obviously, Alan will have a more direct experience on that, like when you say there’s no support, I mean any free Open Source thing by default doesn’t have support. Right? I mean, that’s the way I’d frame it. You know, a lot of people give them crap for like, you know, “Oh, you’re sold out. You’re just enterprisy, dah, dah, dah.” And it’s true, like they have moved up market.

They are focusing for Enterprise on bigger companies, but they’re also, they’ve made some significant investments in open source, which I think are interesting. They have this whole community engineering effort. They took basically their top Magento engineer, a guy named Maxie Ketteringko. And his full-time job is now the Magento community engineering. So he manages Open Source. I think he has a team of like five people. They’ve been getting really good at managing GitHub. So Magento 2 is on GitHub now.

Back in the Magento 1 days, it wasn’t like that. Poll requests are getting handled quickly. There’s tons of poll requests that have been merged by the community. Again, these are a little bit more developer facing kind of benefits, but I think they put some really serious investment into that. They’ve also done some interesting things like baked incentives into their partner probe, because in the past, like partners only cared about Enterprise licenses.

All they wanted to do was sell you an Enterprise license. Community edition was like I don’t wanna deal with that. But they baked some interesting incentives in where as a partner, as a solution partner, you get like partner credits for contributing to Open Source, which I think is kind of an interesting way to bridge the gap. So I think they’re doing some interesting stuff there.

An Open Sourcer for Life

Andrew: That’s good to hear. They’re actually investing a little more on the Open Source side. Alan, what’s been your experience as a store owner, because you’re on Open Source, not Enterprise, right?

Alan: Yeah, I’m on Open Source. I guess since I’m on Magento 1, I’m still on Community Edition of it.

Andrew: You’re in the edition for life.

Alan: But, yeah, support wise, it’s not. If you’re on Community Edition or Open Source, it’s not like…if you have an issue, it’s not like you can just email someone at Magento, you know, and get the kind of technical support. You really have to have a good developer, a good team on your site to get that. I have noticed when you Google or, you know, Magento issues or have questions on Magento issues, it’s usually something from stack overflow comes up.

I have noticed that there are…some of the Magento has become more involved over the past few months in those discussions. So it seems like they’re listening a little bit closer to the community side now. But, yeah, as Kalen said, I think a lot of the focus is on the Enterprise side and getting those customers and making them happy and developing out the B2B, not to say there’s not support on the community side. You just have to seek it out. You have to have the right developers on your side, and you have to essentially know where to look to get that support.

The Importance of a Magento Specialized Hosting Company

Kalen: And then the only other thing I’ll throw in. I think in that category is like I think it’s really important to have a good specialized Magento hosting company. There’s a lot of companies that do Magento hosting, and I think in my opinion a lot that don’t do it very well. There’s a few that I like. You know, there’s one…I don’t need to give them a plug or anything, that sponsors a podcast, that I’m a big fan of and like they have full-time Magento developers on staff so that if you have a question, “Hey, something’s messed up with my site,” like there’s always this interesting tension between hosting and development.

Hosting says, “Oh, it’s a developer problem.” Developer says it’s a hosting problem. I mean, that’s one of the annoying things about self-hosted in general. So I love having a specialized host where they can, you say, “Hey, my site’s slow,” and they can look at stuff on the infrastructure side. But they can also say, “Hey, you know what, let me go ahead and look at your code and look at these queries and see there’s a bottleneck in this catalog related query.”

And, you know, they have pricing that starts, I wanna say like 40, 50, 60 bucks a month, a lot of community merchants. I mean, you probably need to have a good developer as well, but having a good host that can back you up with kind of that tier one or two or three development level support even, I think gives you a lot of just overall peace of mind.

Andrew: I couldn’t agree with that more. I went from a non-specialized Magento host to a specialized Magento host, and it sounds like it’s, Kalen may be describing the same host that I used.

Kalen: It’s Magemojo?

Andrew: No, it’s not. There’s more than one out there.

Kalen: Yeah, there’s couple solid ones that I’m a fan of. And Magemojo is the sponsor of our podcast.

Specialized Hosts for Support Issues

Andrew: Sorry, having that support though, I’ve had them do code audits, looking for site speed improvements. There’s one point where my site went down. It was a Friday afternoon, and my developers being in Poland, you know, they were already asleep. I had no idea what was going on. So I submit an emergency ticket, and within 15 minutes, my site was back up.

It was a Magento issue or a Magento code issue that I myself caused but without realizing it. But I didn’t have a host with developers on staff. My site would have been down for probably the entire weekend. And I think a lot of people run into that problem. That’s why I think you hear a lot of Magento horror stories out there because they just throw it up on shared hosting, and they don’t have the developer support that they need to actually run Magento.

Kalen: So, Alan, who are you on right now?

Alan: The host is Sonassi.

Kalen: Sonassi, dude, I love. Actually, it’s funny. Sorry, real quick, I’m big fan of Sonassi. They were the very first sponsor of our…the second sponsor of our podcast for a while, good friends with the owner there, Ben. They actually were recently acquired, and it’s all public, moves public. They acquired for like 16 million pounds and just amazing. I’m super proud of them, and they’re incredible.

Alan: Yeah, he’s pretty involved in the community as well.

Magemojo, Sonassi & More Magento Recs

Andrew: Both of those hosts are ones you can recommend, anyone else that either of you guys can recommend that is a pretty reputable name in hosting if people are looking for good hosting for Magento.

Kalen: You know, a lot of people use Nexus. They’re not small. I tend to sort of prefer smaller companies, maybe 5, 10, 20 people-ish type companies. So a lot of people use Nexus. They’re fairly specialized, not entirely specialized in Magento. They do some WordPress, some expression engine. They’re out there for sure. Lexicon, I think, is the other one that I’m thinking of. So those are the ones I’d probably mention.

Alan: And the great thing with them, at least with Sonassi, is that they can take your current site. They’ll just take a copy of it, put it on a server of theirs, and will give you access to it, so you can see exactly how it runs. So you can see if there’s any site speed improvements and how much faster it runs on it.

And Now for the Cons: Development

Andrew: Yes, we covered some of the strengths of Magento, kind of just throughout the discussion, you know, of those, total control, of course, customization. Multi-site is a big one. Some of those features that are kind of…the newer one is coming out in Magento 2 that, Kalen, you alluded to. I want to switch a little bit to some of their biggest weaknesses.

For me, I mean, we can start with this one, you know, painful system admin especially on a smaller individual team if you don’t have a dev full-time, like when I…Magento was great for me to learn UNIX. I never had a reason to learn UNIX before, before I installed Magento. You know, it was a great incentive because I’m like the whole business would have crashed if I didn’t know at least the basics.

So people moving, and maybe we can take the approach of moving to…if you’re starting from scratch, you’re probably gonna move to the 2X platform. Is that still the case, like is it still…is that gonna be the biggest weakness for people, is just the overhead. And how bad is it? Is it getting better? Is it still pretty painful?

Better Extensions & Code Quality Standards

Kalen: I think there’s some improvements. You know, again, the admin is improved as far as UX goes. They have also made some improvements to marketplace. I think that was one of the big pain points, is you have extensions conflicting with each other and things like that. They’ve beefed up their code quality standards i their kind of code review process to the point where as an extension vendor, it’s a little painful. I know people that, you know, it’s taken them quite a while to get their extensions improved. But I think you’re starting to see lots and lots.

You know, a year ago, Magento 2 was out technically, but like virtually zero actual extensions that were available. You know, there’s a lot more coverage in terms of extensions. They are taking a bigger cut of the marketplace revenue. They’re taking like a 30% rev share, which, again, as an extension vendor, I’m not in love with, but I understand why it’s a smart business move for them.

It’s funny. Business-wise, you see them doing a lot of things Shopify has done in terms of going cloud, going SaaS, getting 30% of extension revenue, but I can understand. So all that to say, I think marketplace is improved. Here I go, just talking the strengths, again. You’re trying to get me to talk weaknesses. Yeah, I mean I think…you know, hopefully, you don’t have to dip into UNIX unless there’s an extension that isn’t on market place that you wanna install. I think like you said, complexity and costs are gonna the big areas for sure.

For Store Owners, Easy Maintenance Once The Right Development’s In Place

Andrew: Alan, on your side and again, you’re kind of…we’ve got the two sides, the one 1.x versus the 2.x, that kind of the re-platforming. Alan, again, you’re on the 1.x side of things. And maybe I was just error-prone, and I was the one who triggered all sorts of 50 gigabyte log files that I didn’t realize I was doing it and had all the problems. You know, on the 1.x or maybe, do you have as many problems keeping your site up and running and smooth as I did? Do you have a great developer? How much work is it to keep your site running smoothly and cleanly?

Alan: I would say once it’s developed and you have the extensions already installed and running, maintenance is pretty easy. The only times that you really have to go into the code, not even go into the code, but make any changes, is when there’s some kind of security patch. And most of those, you know, you can install those in less than 15 minutes unless it’s one of the bigger patches that touches a lot of files.

But as far as extensions and what’s going on with the marketplace, it seems like a lot of the extension developers are kind of in a transition period where they’re developing more for the Magento 2 platform and so in the last year or so. I mean, if you’re an early adopter to Magento 2, you probably ran into issues where the extension developers hadn’t created the M2 version of it.

I think that’s gotten a lot better as, you know, M2 matures a little bit, but that also creates issues with new Megento 1 extensions, because so many resources are working on getting those Magento 2 versions out.

Good (And Bad) Magento Extensions Are Out There

Alan: But one of the biggest weaknesses, I think, of the extension market is that there’s a lot of junk out there, and you kind of have to wade through and find the good extensions with good…not just good as in works, but you have to find good extensions that was coded correctly. And if you’re not a developer, that’s incredibly difficult to do. So I think this new Magento marketplace that Magento launched last year, it takes out a huge pain point in that because they actually do code reviews of the extensions and essentially vet out what’s good and what’s bad.

Andrew: Guys, what do you see, because I’m going to wrap things up here. What do you guys see coming on the pipe for Magento in 2018 and beyond? Either trends you guys have seen or maybe explicit things that Magento’s talked about releasing that aren’t out yet. Any news on the horizon that comes to mind?

Big Magento News on the Horizon

Kalen: Yeah, so, I think probably the big one is progressive web apps. So they announced a collaboration with Google, recently. They’re working on kind of a tool set around, so progressive web apps. And I don’t know too much about them, but they’re basically where you’re leveraging more of the tools that your Chrome browser gives you for notifications, faster loading time, things like that and so, Google, I’m sure at some point, Google is gonna heavily incentivize progressive web apps in the search results.

They’re probably already doing that to a certain extent, and also it’s just good user experience, right? Things work well if you’re offline and your internet connection, it’s more mobile-friendly. So they’re doing some interesting stuff there. They’ve hired some pretty heavy hitter front-end guys, and they’re doing some interesting stuff there. So hopefully, we’ll start to see some of that go live in 2018.

Alan: Yeah, I’m sticking out on Magento 1, so I don’t wanna know all the new features that are out because may…

Kalen: Having that said…

Alan: I don’t wanna spend money switching to Magento 2.

Andrew: Alan’s covering his ears for this part of the podcast.

Kalen: No, I think there a lot of merchants that are in like a wait-and-see holding pattern. You know, the holding pattern has probably extended a little bit longer than anybody really wanted to. I think the case for Megento 2 is getting stronger, you know, every day as they’re adding features and doing stuff, but it’s still not necessarily like a no-brainer to do the upgrade because, you know, it’s not necessarily gonna be cheap.

Alan: Yeah, and generally speaking, it seems like going to 2018 that it’ll be an easier decision if you’re on Enterprise. There’s just so many new features that Enterprise…it seems like they’re putting a lot more focus on it.

Andrew: Guys, this has been super helpful. If you don’t know both these gentlemen, Alan is the resident eCommerceFuel Magento expert, like I mentioned, and he also runs parkcatalog.com. So if you wanna check out a cool Magento site or just if you need, you know, Mats, cargo liners, door moldings, anything like that for your vehicle, check him out parkcatalog.com.

And Kalen is the host of the MageTalk, Magento Podcast. You can find that at magetalk.com, on iTunes, or wherever your favorite place to get your podcasts, also the founder of magemail.co and a current advisor there. He recently sold that, but an email marketing platform specifically for Magento and also the… You own founded commercehero.io, which is a service that helps you find great Magento experts and developers, is that right?

Kalen: Yes, that’s right. And then just small connection on magemail.co. I wasn’t able to get the dot-com. So it’s magemail.co.

Andrew: Oh, apologies.

Kalen: Yeah, don’t worries. So commerceario is my current jam. I have been focused on the last year, so full-time and just building up a talent marketplace, kind to address that pain point of where merchants are like, “Man, my developers suck. So I need a good developer or whatever.” And so that’s what we’ve been focused on and that’s been fun.

Andrew: Awesome. Gentlemen, Alan and Kalen, I appreciate you guys coming on and talking Magento with me. Thanks, gentlemen.

Kalen: Thank you so much, man, really appreciate it.

Alan: Thanks to you, too.

Kalen: Cheers.

Andrew: That’s gonna do it for this week’s episode, but if you enjoyed what you heard, check us out at ecommercefuel.com where you’ll find the private vetted community for online store owners. And what makes this different from other online communities or forums, is that we heavily vet everyone who joins to make sure that they have meaningful experience to contribute to the broader conversation.

Everyone who we accept has to be doing at least a quarter million dollars in annual sales on their store, and our average member does seven figures plus in sales by their business. And so if that’s kind of interesting to you, if you wanna get, you know, connected with a group of experienced store owners online, check us out at ecommercefeul.com where you can learn more about membership as well as apply.

And I have to again thank our sponsors who help make this show possible, Klaviyo, who makes email segmentation easy and powerful. The cool thing about Klaviyo is they play your entire catalog customer and sales history to help you build out incredibly powerful automated segments that make you money on autopilot. If you’re not using them, check them out and try them for free at Klaviyo.com.

And finally, Liquid Web, if you’re on WooCommerce, if you’re thinking about getting on WooCommerce, Liquid Web is the absolute best hosting platform. For three reasons, one, it’s built from the ground up for WooCommerce and optimized by some of the best industry professionals in the WooCommerce or WordPress space. They really know the stuff, and it’s highly elastic and scalable, as well as comes with a whole suite of tools and performance tests to optimize your store. You can check them out and learn more about their hosted WooCommerce offering at ecommercefuel.com/liquidweb.

Thanks so much for listening, really appreciate you tuning in and looking forward to talking to you again next Friday.

You want to connect with and learn from other proven e-commerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight-knit vetted group for store owners with at least a quarter million dollars in annual sales. You can learn more and apply for membership at ecommercefuel.com.

Thanks so much for listening, and I’m looking forward to seeing you again next time.

Welcome to the first ever shopping cart month at eCommerceFuel! I’ll be spending all of February diving deep into the most popular carts in the eCommerce space with people who know them inside-and-out. This week I’ll be talking Shopify with Carson McComas from FuelMade.com. He really knows his stuff and was crucial in the redesign [...]

Andrew: Welcome to the eCommerceFuel Podcast, the show dedicated to helping high six and seven-figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow eCommerce entrepreneur, Andrew Youderian.

Hey, guys. It’s Andrew here. And welcome to the eCommerceFuel Podcast. Thanks so much for tuning in today for the kickoff of shopping cart month on the eCommerceFuel Podcast. I’ve never done this before, but I’m gonna call it the first annual shopping cart month. It would be fun to do this on a regular basis. Shopping carts are one of those things we can talk about and, you know, they’re always underlying the conversation. Of course, they’re what powers most of our stores, all of our stores.

And we’ve never really done a deep dive on the top carts in the space. So I thought it would be kind of fun to totally nerd out on those. Half of you are probably turning this podcast off right now. And the other half are probably giddy with excitement, or maybe 20%. Not everyone is probably as geeky as I am, but we’re gonna be doing four kinda episodes this month. Today we’ll be talking about Shopify. Next week, we’ll be talking about Magento. The week after that, we’ll be talking about WooCommerce. And then the final episode will kinda be a grab bag of just kinda some comments area on a handful of other carts in the space.

And why did I pick those carts? Well, those are the carts that are most popular, at least as told by our community software in the eCommerce field private community. So we have a review and software directory that we’ve built for our community members. And it actually goes out every week. And it scans everybody’s website to see what software they’re using so we can tell what, you know, shopping cart or email service provider or hosting provider. It builds a database. It emails all of our members when they install new software and asks them to review it.

So we have real-time stats and reviews from a lot of our members on what they’re using. And we can see on all of our members what they’re using. So I looked at our database to really see, you know, what the most popular carts were. And that’s how I found out.

So in terms of Shopify, you look at the adoption of that in the eCommerce community, in the eCommerceFuel private community. And as of, you know, kinda the beginning of 2018, 401 of our 1,000-ish members were on Shopify, either Shopify or Shopify Plus. So 401 on Shopify. Of that, there were 65, so about 15%, of that 400 were on Shopify Plus. And Shopify had an average review of 4.7 out of 5 stars.

So to put that in context, Magento, the next second most popular cart, in our community is being used by about 80 members. So that’s an enormous gap. You’ve got almost 5X the adoption of those on Shopify versus Magento. So that’s probably not, you know, news to anyone, but Shopify, they’ve been killing it the last two years, at least in terms of the number of people on their platform and have really grown.

A lot of people have been moving there from other carts. So we’ll get into that on today’s show, but yeah, they’re by the far the number one cart, at least, you know, in the six and seven and maybe even low eight figure range, I would say, because that’s really where the wheel house for our community. So that’s a little bit of context for you. A quick disclaimer, Shopify has sponsored the eCommerceFuel Podcast in the past. They’ve also sponsored our events. And I’ve worked on them, you know, with books and other content.

So I co-authored a book with one of the guys over there on drop shipping. And I just have a friendly relationship with them. So I want to make sure that, you know, you guys are aware of that and as we get into this discussion. So Carson McComas from Fuelmade.com is gonna be the gentleman chatting with me today. Gentleman, that sounds so official. He’s a good friend, a great guy, knows Shopify inside and out, and does, in my opinion, the best development work on the Shopify platform, maybe even just in general I’ve ever seen.

He’s a pleasure to work with. He did my redesign at Right Channel Radios. He’s who we’ll be chatting with in a discussion today and really knows this space well, but before we jump in, we want to thank our two sponsors who help make this show possible.

First, a big thank you to Liquid Web, who is now offering completely managed hosting for WooCommerce. And we’re talking about Shopify today, of course. And this is not a pitch to try to convince you that WooCommerce is better than Shopify. Even the team over there sure would single it out and say, “You know what? Shopify is a better fit for some people than others,” but if WooCommerce is a better fit for you, if it’s really important to have, you know, all the keys to the castle to be able to customize your data and your source code and you’re on WooCommerce, you’re gonna be hard-pressed to find a better solution than Liquid Web’s hosting for WooCommerce.

And the biggest thing is how elastic and how scalable their solution is. One of the biggest benefits of having, you know, a hosted service like Shopify versus Woo is that, you know, if you get a ton of traffic, they deal with it, kind of the trade-off you make between the customization and the hosting side, but with Woo, you get the best of both worlds. You get highly scalable and you have full customization. So if both of those things are important to you, if Woo is something that you’re on or looking toward, check them out at ecommercefuel.com/liquidweb.

And secondly, I want to say a big thank you to Klaviyo, who makes email automation easy and powerful. And Klaviyo just gives you an insane amount of precision when it comes to creating targeted automated flows that you can send out to your list. And I’m in it right now.

And a few of the metrics you can use to create and trigger those segments, those email lists, out to people, one, how long somebody’s been active on your site, whether they just placed an order, whether they have cancelled an order, whether an order has been fulfilled, if they’ve purchased X product within the last certain amount of time, if they’ve purchased X product, but not why, they’ve purchased a certain number of times in the following months, it goes on and on and on. One that’s kinda cool, you can even target based on location.

So say, for example, you sell drones, you know, those cool little insect drone things, in California. You can set up a flow once to maybe everyone in California to say, “Hey, thanks for buying a drone. Here are the top 10 places in California where you can get gorgeous drone photography.” Do that for your top five or six most popular states. That’s pretty cool. So if this sounds interesting and you want to apply this power to your own business, you can get started with a free trial. Check them out risk-free at klaviyo.com.

Shopify in 2018

Andrew: All right. Let’s go ahead and get into today’s discussion. Carson, the way I’ve been kicking off all these discussions for shopping cart month is to kinda get my sense of just where I see, you know, a given cart in 2018 and get your thoughts on if it’s a fairly, from your perspective, accurate portrayal or maybe not quite as accurate as what you see.

So for Shopify, you know, I feel like they’ve become more or less the industry standard for most or at least a great many use cases, and especially with merchants like the ECF community, you know, high six, seven, and even potentially low eight figures, in some cases. Not everyone loves them, but I’d say a large percentage of people do. A large percentage of people respect them and, you know, look at the metrics like I mentioned at the top of this podcast. I mean, they’re 4X adopted.

They have four times as many users as the next closest cart. I’ve seen a slight shift, you know, maybe over the last one or two years from more of a complete kind of free-wheeling up-start type culture to one that’s maybe a little more intentional, more focused on growing profits. I’m sure in becoming a public company, you know, that nudged that along.

A lot more effort behind Shopify Plus, again, on capturing higher end market and end profitability like with acquisition with overload trying to widen their user base a bit. So it’s still a great company, but kind of that modest shift in their focus and kind of intention. Do you think that’s a fair snapshot for where they are in, you know, 2018?

Carson: Yeah, I do. I think I would agree with almost everything you said. They’ve lost a little bit of their sort of scrappy feel, which for those of us that were kind of in in the early days when it felt fun and scrappy, some of that has faded and been replaced with a little bit more of a mature, grown-up company, but yeah, I agree with you. I think that’s an accurate portrayal of kinda how they feel, as well as I agree they are a pretty good solution for most use cases that we run into, as well.

When Shopify Doesn’t Make Sense

Andrew: I said this. You said this. They’re probably a great choice for most use cases. When do they not make sense for people? Obviously, they’re a hosted platform. And so if you want 100% complete control, you want to be able to dive into every aspect of the source code, if some reason the data’s really important to you, you can’t go to Shopify, but let’s assume that’s not the case. Let’s assume you want to be hosted. Are there any instances where they’re not a great fit, where someone should maybe consider another hosted option that’s, you know, based on certain needs that Shopify isn’t the best to cater for?

Carson: There are… Honestly, it’s a tough one in part because I know all the workarounds in my head for the things that, but, I mean, I think the times when it doesn’t make sense is if you have a lot of technical complexity and frankly, if you’ve got an in-house team that you want to keep busy.

If you’ve got a lot of technical complexity and you need a very, very flexible solution to deal with that, I would maybe have a side argument with you about whether you need all that technical complexity to accomplish your goals, but if you do feel like you need that, Shopify cannot fit as well and if you’ve got like a really, really large catalog and a lot of complexity in that regard, it can make sense to use something else.

And by really large, I mean many hundreds of thousands of SKUs or if you’re running into like there are some technical limitations that are kind of frustrating with Shopify, which we can get into, you know, some variant limits and some stuff that can get frustrating and if you want a solution that doesn’t have those limitations, I could see maybe floating to another platform.

For Multi-Store Users

Andrew: What about a multi-store? Is that a big one? Have you seen any good…I know some other platforms, some people have… Multi-store, isn’t it Ali supported with their Shopify or Shopify Plus?

Carson: So the way it works with Shopify Plus today is when you sign up for Shopify Plus, you get 10 stores essentially under that account to use for the same brand and the same products. So the way multi-store is handled today is, let’s say you want to have three international stores and a wholesale store, you’ll set up your B2C store. And then you’ll create these clone shops essentially for those international stores and then for the B2B. And you’ll typically use an ERP as kind of your multi-store management component to that.

Andrew: Like tying NetSuite or something into it to manage all of them.

Carson: Exactly.

Andrew: Yep. Yep, but those are all under one admin, right? You’d have to have separate logins for individual admins.

Carson: Today, that’s correct. Exactly. You know, hopefully your product management and that is being done with your ERP and order management, but if like you need to go in and update home page or things like that, you’re going to have to go into each individual store and do it. That’s correct.

Other Shopify Weaknesses

Andrew: Got you. We’ll kinda maybe touch on a few more shortcomings, and then go to some of the big strengths for Shopify, given that, you know, obviously, they have a lot because they’re kind of top of the heap at the moment, but kinda wrapping up on the weakness side, any others that you see that Shopify has its weakness, relative to others?

Carson: So the weaknesses that we run into and, again, I feel like I have workarounds for all of these, but the weaknesses we ran into is the 100 variant limit can be frustrating. There’s workarounds for that, but that can be a little bit limiting, if you’ve got some complexity. Multi-store, multi-currency. I mean, that story that I just outlined is okay, but not great. Shopify’s working on that though, which we can talk about.

One of the strengths of Shopify is the ecosystem, but I will say that some of the app store quality I would say is mediocre. You can get some kind of poor apps that can create a poor experience. I don’t know if that’s directly Shopify’s fault, although, you know, they are vetting what goes into the app store, but it does seem to be a little bit of the Wild West in terms of quality in there sometimes, especially for larger merchants.

Not being able to take credit cards, that’s a weakness I would say in Shopify that can drive people crazy. You know, as an admin, if somebody buys a pair of shoes and they call you up and they want to buy, you know, a different pair that costs more, you can’t go in and just like charge them the extra $10 for the new pair. You’d have to like cancel the order and reorder and do some stuff. So that part kinda drives people nuts. And then I think maybe another weakness is…this benefits us as an agency, but finding good help.

I think the Shopify development community and the design community is still kind of ramping up relative to demand. And that seems to be a little outpacing that right now, which is, again, good for us, but I think for merchants, it can be a little frustrating. I think you find that probably anywhere. That’s just technology, but it’s an aspect, as well.

And Their Biggest Strengths

Andrew: In thinking about some of the strengths on there, I think the three that I kinda see…and I’d love to hear your thoughts. I’m sure you have some more, are I feel like they have best tech stack, and platform for just maybe not out of the box. They’re a little bit more. Their kind of philosophy it seems to me is more create a really great foundation. They’re a liquid foundation to customize everything and not include every bonus under the sun, but create a great ecosystem where people can add in.

On one hand you could argue…it’s not like you could, but some people say, “I have Shopify. Yeah, you pay $200 a month for the core, but then you can add $250 in apps every month to get what you need to do.” And that is a down side in some sense. It’s also a nice aspect in that it fosters a great ecosystem to really customize it well, but I think it’s hard to argue…well, you could argue, but in my experience, their tech stack and platform seem really solid. And they have a good ecosystem.

And their team has always impressed me in terms of the quality of people they hire and, of course, just kind of the product comes, you know, right out of that. So those are the big strengths I see. And any more that you see or any that you take issue with on that list?

Carson: No, I agree with what you just outlined there. And I was being slightly hard on the ecosystem there, but there are some great apps. There really are. They have some really good solid stuff, a good platform. It’s very, very customizable. I think there’s a misnomer. Folks think that you can’t customize Shopify, but man, we have built some ridiculously diverse, different, and unique stores on that platform. I think the other things that Shopify, you know, other strengths, especially for merchants that aren’t gonna do a custom build, the themes in the theme store are really solid.

They’re optimized for mobile. They’re gonna be design-focused, functional. For the most part, they’re really strong. I mean, an interesting side note about the theme store. There are 61 themes in the theme store. And like that’s nothing for 500,000 plus merchants, right? I mean, this just speaks to Shopify’s extreme care in making sure that if a theme shows up in the theme store, it’s gonna be pretty optimized and good.

So I think that they have strong themes, you know, sort of the self-hosted versus SaaS argument, of course, is…we could go into length on that at some point, but that’s obviously a great strength for Shopify. You know, they’ve got good channel integrations. They’ve worked really hard to lower the barrier of entry for a lot of different things. Like you want to get on Amazon, eBay, you know, Facebook, Instagram. It’s like these are channels. It’s easy to set those up.

And Shopify’s done a good job of kind of making that very approachable for nontechnical folks. And, you know, I think the admin is pretty friendly. You know, I’ve looked at the admins over on the other sites, other platforms, and they’re not friendly and easy. Shopify works really hard at making that admin really easy to use and, you know, kinda mobile first in some ways.

So if you want to manage your entire site from your phone, you can, which is kind of a handy perk, plus, you know, scalability and that strength of, you know, they did…over Black Friday, Cyber Monday, I think they did $1 billion in GMV. So this is a platform that can handle a lot of volume. And it’s kinda peace of mind for merchants that are tired of their server going down when there’s a spike in demand.

A User-Friendly Cart

Andrew: It’s funny you mentioned the admin. When we moved from Magento to Shopify, I had, oh, probably six or seven SOPs just dedicated to placing orders and editing orders and cancelling orders in Magento because it was a nightmarish…if you consider all the things with refunds and replacing, it was just a nightmare. And with Shopify, I was planning on getting right to SOPs, but then my VA got in there and did not need it.

You could say it was very intuitive. They’ve done a great job with that. How about Shopify Plus? You know, I’ll speak for myself. At least a couple of years ago, two, three years ago, in the early days of Plus, they rolled it out. And I kinda told the team this. I thought the Plus differentiators versus their core offering, it made sense for a few people, but I think broadly it was a tough sell for the difference between the two platforms.

And I feel like that’s gotten stronger in terms of the feature set that you get bumping up from just kinda the core plans, professional plans, to Plus. It’s like they’ve differentiated it better in the last, you know, 18 months. Do you feel the same?

Carson: Yeah, definitely. And I think I agree with you. I think in the early days when Plus came out, they were trying to create a solution for bigger merchants that kinda wanted to use it, but paying $29 a month didn’t feel right. And so they created an offering. At that point, it was $1,000 a month. And you got dedicated support.

And you got some of these things, but it was a difficult case from a technical perspective to differentiate, but this year particularly, I think 2017 has been sort of the strongest evolution in that differentiation, you know, with things like Shopify Flow, which is awesome, amazing. It’s sort of an automation tool built into the admin. It’s kinda like Zapier meets Shopify admin. It’s amazing. Shopify scripts are really strong and handy to deal with, with the complexities we see merchants run into. Shopify Launchpad that’s recently come out is pretty slick, as well. That’s a way of…

Andrew: Yeah, sorry, what’s Launchpad? You were trying to explain that. And then I interrupted you.

Using Launchpad

Carson: No, you’re good at this. The Launchpad, it’s functionality so that you can automate pushing things live to your site. So for example, we’ve got a client who did a 12 days of Christmas launch. And so each day, they had a new promotion. So we had a new Shopify script that would run. On their home page, they had like a new banner and a new way of presenting it.

And so we set up all these 12 different days of Christmas themes and scripts and all this different stuff, automated it all with Launchpad, and just stand back. And for 12 days, it just runs all runs all by itself using Launchpad. And that’s pretty slick. And then there’s the multi-store that we just talked about earlier that’s a nice differentiator with Plus. So, you know, if you’ve got international stores and a wholesale store, pretty soon it starts adding up. And Shopify Plus starts making more sense on that.

Andrew: Another big thing too is with Plus, you can use an extra external gateway and not have to pay that, you know, half a percent, percent, or whatever it is on their non-Plus plans in terms of transactions for credit card fees, right?

Carson: Well, for the most part. So actually, you do pay .15%. If you don’t use Shopify payments, you do still pay a transaction fee on Plus. They didn’t use to. It used to be no transaction fee, but that changed when they did the big price change earlier this year. So you do still pay .15% on transaction fees, if you’re not on Shopify payments.

Shopify Payments

Andrew: How is Shopify payments? When I was on it, it integrates really nicely, as least for me. And this is a little outdated. It’s been a year plus since I was on it and, you know, really using it day to day, but it integrated nicely. I’m not sure if it was, you know, rock bottom pricing, but it was somewhat reasonable. Your thoughts on payments in terms of competitiveness of rates and also, you know, usability, chargeback issues, fraud detection, and the whole package. Does it make sense for merchants? Is it a pretty good solution at this point?

Carson: I think so. I mean, on Plus particularly, which is kind of more where we spend time, they’re paying 2.15% plus 30 cents on domestic VISA and MasterCard, which is…they might be able to get it lower somewhere, but it’s at least competitive, right? Some people are like grandfathered into these old amazing rates. And they don’t like to or they don’t want to move from those, which is understandable, but I think it’s pretty competitive.

I mean, to be honest with you, I would say probably 80 plus percent of our merchants are picking Shopify payments, you know, a small sample size, but it is I would guess broadly reflected in how people are using it. In terms of like fraud and that, a nice thing about Shopify payments is there is some of that that’s built in already. And then like chargeback response is kind of built in.

You’ve got Shopify support and a team that’s working with you to sort some of that stuff out, which is nice. It’s kind of all integrated into one piece there. Another thing worth mentioning with Shopify payments, you also get Apple Pay and you also get Shopify Pay, which is pretty slick. Shopify Pay makes it so that if somebody goes to a Shopify checkout and checks out… So on any Shopify checkout, they check out for the first time.

After that, any time they hit any other Shopify checkout page and they punch in their email address, they’re gonna get a code that shows up on their phone. They punch that in, and everything’s saved for them, including their credit card payment information, which is I think a pretty nice feature that’s built in with Shopify payments too. So there’s some perks for having it, as well.

When You’d Need Plus

Andrew: Yeah, that’s really nice, especially Apple Pay with the finger. I just finally, you know, and I’m kind of a dinosaur here, upgrading to a current day era MacBook Pro. And having that little fingerprint reader is pretty slick. You know, when does it make sense for someone to go with Shopify Plus versus regular? Is it in that $1 to $2 million range? Is it higher than that or does it just vary by the person?

Carson: You know, I think it’s more a case of… Like if you’re at I would say $750,000 and growing, it starts to make sense. What we notice though is the pull to move to Shopify Plus is generally a technical one, sort of a complexity one. If you’ve got complexity that can be addressed with Shopify Plus, it starts to make sense.

If you want access to those nifty apps and features that we talked about, that’s kinda when it starts to make sense, if you want that sort of dedicated support that you’re gonna get with Shopify. You know, if you’re doing a lot of volume, it’s nice to have sort of the red phone in Shopify, if you will, with some of that. So I would say, yeah, probably $1 million and up is when it starts to make sense or maybe below that, but growing pretty quickly.

In The Shopify Pipeline

Andrew: Well, what about what you see coming down the road for Shopify in 2018? I’m gonna throw four of them out here, which you can maybe comment on and, of course, anything else that I don’t mention, but you alluded to credit cards on file. That seems like such a no-brainer, especially when you can tokenize it with something like Stripe or authorize.net. And it would make things so much easier for reorders, for admin. So do you think we’ll see that?

Do you think we’ll see multi-site in an authentic, like a real, you know, all tied into one admin, multi-currency…I mean, this drives people crazy. Unless I haven’t caught it, I still don’t think you can just edit an order in core and without having to cancel and reissue. Any of those things you see or anything else that’s really notable coming down the next year in terms of Shopify development?

Carson: They’ve gotten a little more opaque about their road map, but I would say saving credit card and full tokenization, I don’t see that coming in 2018 or maybe ever. I don’t know. I think they’re trying really hard to be PCI level one compliant. And there are some mechanics that I think they’re trying to adhere to when it comes to that stuff.

So I haven’t seen a lot of interest in moving to that. Again, I don’t have any insight on whether they’re doing it or not, but I kinda don’t feel that way. Multi-site, multi-currency, definitely that’s coming. I don’t know if it’s coming in 2018, but it’s a priority. They’ve talked about it at Shopify Unite. They said, “This is our number one priority. We’re working on this now.” So I definitely see that coming soon. You know, I don’t know how soon as in months or years, but it’s definitely a priority internally for them.

In terms of other stuff, it’s tough. I do have a teeny bit of inside information, but I’m under NDA. So I can’t share that, but I can say sort of broadly Shopify is investing a lot of money into growth and making sort of that barrier to entry into Shopify lower and kind of focusing on…maybe this is just my visibility, but a lot of focus on the plus end of the market, the sort of growing and booming ecommerce segment of the market. So there’s a lot of energy and resources being put towards that. So it will be fun to watch.

Competitors in Carts

Andrew: Do you see anyone being able to challenge them in the next two to three years? Like, I can’t talk about the top, I feel like they have become the de facto choice for a lot of people. Again, not everyone, but, you know, close to half of the people. And on one hand, that’s great. On the one hand, it’s great that there’s a team out there and a product out there that is, you know, solid enough and has a good enough reputation team behind it that that can be an option.

On the other hand, the long term, the competition’s always good, right? And even the best people can get complacent, if they don’t have someone nipping at their heels. And I feel like, at least on the hosted side, they’re quite a bit in the lead in terms of especially adoption. Is there anyone that you look at that you think could potentially, and obviously not overtake them, but provide like a compelling alternative in the next two to three years? And if so, who would that be?

Carson: Honestly, I really don’t see anybody in the next two to three years. I mean, I think there may be a longer-term play for someone, but if you look at the way that Shopify challenged Magento, who’s really sort of the market winner, they did it by like, very disruptive, right, moving to a SaaS model, moving to a different approach to ease of use and development and all that. I think it’s gonna take that kind of a big change, a big challenge, for Shopify to be credibly challenged at this point.

I mean, you know, they’ve got gobs of money in the bank, so to speak. I mean, they’ve got essentially unlimited funding when it comes to being able to grow. And I think they’re using it to grow pretty aggressively. They’re working really hard to snap up market share right now. I think it would be tough for somebody, especially in the next two to three years. I mean, is Magento or WooCommerce or BigCommerce, anybody, gonna do it?

I don’t think those guys are gonna do it. I think it will have to be somebody new that comes in that says, “Hey, guess what? Ecommerce is moving to virtual reality now. And we’ve got the best platform. And, you know, we’re gonna overtake them,” or something like that, but I just don’t see it being any of the current players or anybody that I’ve seen anyway.

A Honeymoon Phase?

Andrew: Does that worry you at all or do you feel…on the other side, I mean, does it make you happy because they’ve got a great enough product to be able to do that?

Carson: Well, it’s a good question, right, because I think Shopify is kind of at that phase. Do you remember back when Google said, “Do no evil,” and we believe them, right, and we’re like, “Okay. Yeah. They’re acting like that.” And then in time, they became a little more evil, if you will. I think Shopify’s kind of in that, “Do no evil,” honeymoon right now. How will they proceed? Will they stay that way? We can hope, but I don’t know. So yeah, I definitely feel there’s value in having strong competition. So, is it a good thing or a bad thing? Both.

The Shopify Ecosystem

Andrew: You touched on the ecosystem a little bit earlier, but I’d love to just ask you to give me a dedicated answer. How is the ecosystem and particularly the app extension market looking, you know, today? It seems like it’s one of the healthiest in kind of the shopping cart space, but you also touched on the fact that, you know, there’s some stuff out there that isn’t quite as vetted or fleshed out in terms of quality and code base. How is it looking today?

Carson: I think that’s exactly right. I think it’s a little bit hit and miss today. Shopify, I mean, they’ve reached out to partners. They’re calling for, “Please improve the apps. Please make apps that are better capable of servicing larger merchants.” There’s definitely a push from the Shopify side toward doing that. So I think things will get better. There are some really interesting players who are coming in like Pixel Union is one.

Those guys are coming in. They’re taking a look at the app marketplace. And they’re saying, “What are some apps that are working that people are using, but that we can improve drastically on?” And so they’re going in and kind of picking these apps to greatly improve on. And there’s other app vendors that are doing the same thing. So I think it will just continue to improve and evolve. And also, I think the offering toward sort of higher end merchants will get better.

It will be interesting to see the evolution of things like virtual reality and augmented reality. And I don’t know how much of that’s gonna be in 2018, but I think that’s an interesting avenue that things will start to drift in. And Shopify is paying attention and putting resources into thinking about that kind of stuff. So that’s probably the most interesting evolution that I think we’ll see about just sort of quality improvement and what there is already.

Leading the Charge in VR

Andrew: Yeah, I think if anyone is going to lead the VR fund, at least in kind of the carts we’ve talked about or will talk about this month, it would probably be Shopify, given just they’re talking about it, you know, at their conferences. And I know Toby is, at least from what I’ve seen, very interested in it. So Toby’s their founder, of course. Your thoughts on the Oberlo acquisition and the business model. Any broad thoughts on that purchase by Shopify?

Carson: You know, it’s interesting. They’ve taken some heat for that. And I think it’s an unfortunate timing with the Citron criticism that came out to Shopify. My feeling is that Oberlo, I think they bought Oberlo for two reasons. Number one, people are going to AliExpress. They’re trying to do the drop shipping thing. They’re trying to do the importing.

They’re doing that. So Shopify is sort of moving to where the puck is in some ways, I think, with the acquisition of Oberlo trying to grab that market and help it, you know, have it be on Shopify. The other thing I think they’re doing with that is, you know, Shopify’s all about lowering barrier of entry. You know, with Oberlo, it’s pretty simple. It lowers the barrier of entry and lets you kinda get in there and dabble with that pretty easily.

And frankly, I think it’s interesting. You know, not everybody that uses Oberlo is gonna be a millionaire. I think that’s the misnomer that needs to be dispelled perhaps, but, you know, I look at like my little brother who’s trying to get into e-commerce, right? That’s interesting to set up a shop, do an Oberlo connection, find some interesting products, and just try to get that first sale, right? I mean, you know, there’s something magical about that.

Anyway, so I think those were the appealing things from Shopify’s standpoint. You know, I mean, Oberlo, 85 million products sold I think they said. So it’s not like Shopify’s sort of inventing that. I think they’re just, again, trying to move to where the interest is and capture that market space.

Andrew: And actually, to give a little context for people that weren’t familiar with Oberlo, Oberlo used to be a company that was independent and, of course, bought by Shopify. And they allow you to really tap into the AliExpress, which AliExpress is a marketplace for drop shipping products directly from China to consumers in the U.S.

Parting Thoughts on Shopify

And so the purchase by Shopify just allows people to very easily populate a Shopify store with products they find on AliExpress and just streamlined that whole process of setting up a drop ship from China to a U.S. Shopify store. Any parting thoughts on Shopify going into 2018? We covered a bunch, but anything that is worth saying that I didn’t ask you about?

Carson: You know, Shopify looks strong to me. Like the merchants that we work with, the livelihood of my company is very tight, our choice of platform and who we’re recommending to our clients. And I still feel like Shopify is a safe bet and a good bet. I like where they’re going. I don’t see anybody else that’s really able to serve merchants in the same way and at the same level. And I like the leadership at Shopify. I think they’re thinking about the right things in the right ways. So yeah, I think going into 2018, I’m excited to see how they continue to ramp that up.

The Lightning Round!

Andrew: All right, Carson. I’m gonna do a few lightning round questions with you here before we kinda sign off, if you’re cool with that.

Carson: I’m cool.

Andrew: If you had to identify the number one thing you’re trying to optimize your life for right now, what would it be?

Carson: Happiness.

Andrew: Who’s someone you strongly disagree with?

Carson: Trump.

Andrew: How much money is enough? So, you know, the number in the bank where you’d feel like, “This is good. I’ll work more if I want, but I could be happy here.”

Carson: $20 million.

Andrew: Worst investment you’ve made in the last 10 years?

Carson: Health insurance.

Andrew: That might be my favorite answer so far in this round. Best investment, apart from your business, that you’ve made in the last 10 years.

Carson: Having a business where I can be part of my kids’ lives, definitely the best investment.

Andrew: The first CD you ever owned.

Carson: Well, first of all, thank you for making me feel old. I don’t remember the first CD I ever owned, but I do remember the first cassette tape.

Andrew: I bet that works.

Carson: Michael Jackson “Thriller.”

Andrew: Oh, that’s a good one.

Carson: It was a good one.

Andrew: Yeah, nothing to be ashamed of there. I usually am open for like, you know, people to be like, “TLC Waterfalls,” and, you know, get them on the record with that, but it’s hard to get embarrassed about “Thriller.” And then finally, given that you work with Shopify, and I don’t know if you can answer this, I hope you can, your prediction for the Shopify stock price a year from now?

Carson: Oh, that’s interesting. It’s kind of leveled out.

Andrew: It’s going from people who maybe haven’t tracked this…it IPO’d it around $20 and it has shot up to 5X in the last, I don’t know, year, year and a half, to $100 or so.

Carson: Yeah. I think it will go up maybe 20% more, but I think it’s probably gonna calm down. I don’t know. I’d love to be wrong about that because I own some stock, but that’s my prediction.

Andrew: Nice. Carson, I appreciate you coming on and doing this. If you guys aren’t familiar with Carson’s work and his company over at fuelmade.com, he does incredible high-end to Shopify work focusing a lot especially on Shopify Plus merchants and really beautiful build-outs. He worked with me back in the day when I actually was a legitimate store owner as opposed to just some guy who did a podcast about it and the best contractor I have ever worked with. So I can’t recommend him enough. And also, you guys are doing Klaviyo email work, as well, now, right?

Carson: We do, yeah. We’re Klaviyo platinum partners. So we do email automation with Klaviyo. And it’s a ridiculously effective way to make money. So we’re in on that for our clients, too. Yes, thank you.

Andrew: Yeah. So if you’re looking for, you know, excellent Shopify work or if you want someone to manage your Klaviyo flows and really, you know, help you move the needle on email marketing, Carson and the team at FuelMade is who you should talk to, fuelmade.com. And he’s also our Shopify expert in the forums at eCommerce, so you can hit him up at the @carsonmccomas, if you wanna tag him in any of the discussion. So Carson, I always love chatting with you. And thanks for your expertise, sir.

Carson: Well, thank you, Andrew. I appreciate you having me on and all those kind things you just said about me.

Andrew: Easy to say when you earned them. So thanks, Carson. That’s gonna do it for this week’s episode, but if you enjoyed what you heard and are interested in getting plugged into a dynamic community of experienced store owners, check us out at ecommercefuel.com. eCommerceFuel is the private vetted community for ecommerce entrepreneurs. And what makes us different is that we really heavily vet everyone that is a member to make sure that they’re a great fit, that they can add value to a broader community.

Everyone that joins has to be doing at least $250,000 in sales via their store. And our average member does over seven figures in sales annually. So if you’d like to learn more, if that sounds interesting, you can learn more and apply for membership at ecommercefuel.com.

And I also have to thank our two sponsors that make this show possible, Liquid Web. If you are on WooCommerce or you’re thinking about getting onto WooCommerce, Liquid Web is who you should have host your store, particularly with their managed WooCommerce hosting. It’s highly elastic and scalable. It’s got built-in tools to performance test your store so you can be confident it’s gonna work well. And it’s built from the ground up for WooCommerce. And you can learn more about their offering at ecommercefuel.com/liquidweb.

And finally, Klaviyo, for email marketing, they make email segmentation easy and powerful. They integrate with just about every card out there and help you, you know, build incredibly automated powerful segments that make you money on autopilot. You can check them out and get started for free, klaviyo.com. Thanks so much for listening. And looking forward to seeing you again. Thanks. Bye.

Want to connect with and learn from other proven ecommerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight-knit, vetted group for store owners with at least a $250,000 in annual sales. You can learn more and apply for membership at ecommercefuel.com. Thanks so much for listening, and I’m looking forward to seeing you again next time.

Tim Ferriss. Seth Godin. Gary Vaynerchuk. Jayson Gaignard, like most people, didn’t know these names back in 2012. But over the last few years he’s managed to connect with them personally, had the opportunity to get to know them, build up a personal relationships and even speak at their first-class conferences. There’s an art to [...]

Andrew: Welcome to the eCommerceFuel Podcast, the show dedicated to helping high six and seven figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow eCommerce entrepreneur, Andrew Youderian.

Hey guys, it’s Andrew here, and welcome to the eCommerceFuel Podcast and thank you so much for joining me on the show today. And on the program is Jayson Gaignard who is the man behind Mastermind Talks as well as the Community Made Podcast. And Jayson’s a guy I got to know in the last year or so, and really interesting particularly because he’s proven himself very adept at building a world-class network very quickly.

His Mastermind Talks event, which I eluded to is about 150 people. It’s a very high price point, about $10,000-ish, application only, and he puts together, you know, really high-end events with people doing a lot of really interesting things, and over the years has built relationships and connected with, you know, some of the most kind of well-known people in the tech and media industries: Tim Ferriss, Gary Vaynerchuk, Seth Godin, and he just has built out a world-class network, and that’s what I wanted to talk to him about today, because ultimately at the end of the day like, yes, we have…you know, you can do a lot of stuff with page traffic and build up a following that way, but I would say probably even more powerful than that, especially if you’re playing the long game, is the relationships you have especially in your niche for marketing an e-commerce store. At least for me, some of these relationships with, when I think about marketing my stores in the past, when I even think about marketing and building up the community here at e-commerce fuel, it’s so relational. It’s kind of cliché a little bit that so much in life is about who you know, but it’s true.

So I wanted to talk to Jayson about how he’s able to genuinely foster relationships and build that network, and particularly how he was able to do it so quickly. So I mean, we’re going to talk about things like how he meaningfully connected with someone as busy as Seth Godin, and had him, you know, come onto his podcast, the things that people do to sabotage their networking efforts, you know? How to network genuinely without being sleazier or spraying your business cards, you know, to everyone in a room. Because that never works so well, right? We talk about a lot of those things and also talk about a little bit…not network related, but touch a little bit on the state of community in society today, which is something I like to geek out about as a…or lament. Both actually. As someone who really is in the community building space. So a little bit ancillarily, if that’s a word, connected to e-commerce, but I think it’s a crucial topic in general for all of us in business. So I’ll go ahead and get into my discussion with Jayson, I hope you enjoy it.

Before we jump in, I wanted to say a big thank you to our sponsors who help make this show possible. First to Liquid Web, who is offering a completely hosted solution for managing WooCommerce, and the level to which these guys have geeked out in the best possible way to make WooCommerce run at its peak is impressive. One little anecdote, I was sitting down with the Liquid Web team over lunch, learning more about them before they became a sponsor, and one thing they told me is they identified that the database calls for writing orders in WooCommerce can be really slow, especially if you have a lot of traffic or concurrent connections.

And so they built a custom plugin that really, really handles completely differently how orders are written into the database, which provides a massive speed boost. Not only that, but they engineer it in a way where if you want to leave and go to a different host, you can take your data with you, it doesn’t lock you in. That’s just one small anecdote to the level at which these guys have thought about optimizing WooCommerce. So if you’re on Woo and you want a highly elastic solution that you can stress-test your store with and be confident it’s gonna run really well, check them out at ecommercefuel.com/liquidweb.

And secondly wanted to thank Klaviyo, Klaviyo who makes email automation easy and powerful. Of course their killer feature is their segmentation and the ability to create dynamic flows that go out. But one thing that they have that gets overlooked a lot of times is the depth of their reporting. So you can, on a flow by flow basis, you can get a sense of open rates, click through rates, conversion rates, and most importantly revenue, so you can tell which flows are working, which aren’t. On an aggregate level you can look at your open rates and unsubscribes over time to make sure that your deliverability isn’t suffering.

And perhaps my most favorite and the most addicting is the real-time flow, where you can see minute by minute what’s happening across your entire store. From people placing orders to starting the check-out process, to opening emails, to clicking on your marketing campaigns and emails. It’s pretty cool. So check them out, great platform for running all of your email marketing, and you can get started with a free trial at Klaviyo.com. All right, let’s go ahead and jump into today’s discussion.

The Relationship Game Plan

Andrew: Jayson, I’m excited to kind of get the sense on a high level of how you approach relationships and networking and your philosophy there, but I thought it would be fun to, right off the bat, talk about a concrete example and then we can extrapolate from…the general principles from there. So let’s say for example you want to get to know someone high profile for, could be any reason. Let’s say Kevin Rose, somebody I just kinda pulled out of thin air. Assuming you don’t know Kevin Rose, which if you do maybe you could tell me, and we could pick someone else, but assuming you don’t, how would you approach getting to know him, and just so, if people don’t know, Kevin Rose, he funded Reddit, I think he’s a partner with Google Adventures, cool interesting guy in the tech space. So what would be kind of your approach, your game plan for trying to get…build a relationship with him?

Jayson: Yeah, so I think a couple of things. One is, whenever I have anybody that wants to connect with a big name, I always ask, “Would he be friends with you?” Meaning, if you want to connect with a millionaire or a tech titan in this case, what would make you fascinating to that individual? And that doesn’t have to be apples to apples. Like if you wanna connect with someone who’s well off financially, you don’t have to be well off financially, but you have to be interesting or fascinating on some level. So for example, I have a friend of mine who’s traveled to 119 different countries. He can sit at a table with almost anybody and hold a great conversation, because he’s fascinating.

So that’s kind of the first thing is really like one thing I’ve always done a pretty good job at is we do balance sheets for our business. Our assets, our liabilities, those kind of things, but I’ve kind of shifted that and have done like personal balance sheets. What am I really good at? What are my strengths? What are my areas that I can improve upon, what are my weaknesses? And again, I’m always looking to be more interesting. I think that’s kind of the first point. Because before you reach out to anybody, even in a mentor/mentee capacity, you have to be somebody worth investing in as far as just the relationship and time. “Would you be friends with you?” is the first thing. The second thing is, have a strong “Why?” I think this is a mistake a lot of people make, and I’ve made this mistake as well, is that we want to connect with people.

You Need a Strong “Why?”

Andrew: Picking their brain is a strong “Why?” right? Just for the record.

Jayson: Well that’s exactly it. So didn’t mean to pick on that specifically, but I get asked for introductions all the time. When people ask for introductions, I always, I wouldn’t question it, I would just facilitate the introduction. And then I would see the follow-up email that they’d do, and I’m like, “Aw, this was a terrible idea.” So instead now I’m like, “Well, just give me a desire, what’s a desired outcome for the introduction?” And 90% of the time, they won’t follow up. The need for the introduction will just die. So having a clear and strong “Why?” for an introduction or a “Why?” for a reason to reach out to a certain individual I think is really, really important. And those are two things that people don’t talk about, and I think that’s much more important than the technical, like, how-to.

With that said, if you are interesting on some level and you do have a strong why, then different ways you can go about it, one of the easiest ways, not easiest but best ways and most effective ways is through a warm introduction. So ideally try to find someone that you are mutually kind of connected with who can facilitate that introduction. If not, then you may have to reach out cold. There’s a bunch of different ways you can figure out people’s email addresses, there’s a lot of great blog posts out there on how to do it, so I won’t, I’ll spare you the details. But in that cold outreach, there’s a saying from a great book called “22 Immutable Laws of marketing”, which is, what works in the military works in marketing, and that’s the unexpected. And I think the same can be said when it comes to trying to build relationships with people.

You know, somebody like Kevin Rose may get 500 emails a day. So if you’re going to send him another email, how can you make that email pop or stand out. So could it be an emoji in the title, I use video emails a lot, so I’ll use a platform like ViewedIt, I feel like I’m in a spelling bee. And you can basically record a video email. And that stands out. And in that email, usually what I do is I say…I’d have a text version and I’d have a video version, but ultimately I would try to see if I can connect with them on some level, whether it be an uncommon commonality, so Kevin Rose is big into tech, so see, you know, if you can leverage that uncommon commonality that you guys share or we always, like all of us have a deep desire for significance and praise, and those kind of things.

So if you’re going to praise somebody and use that in your outreach, don’t just say, “Oh hey, I love your work.” And leave it there. Like be very specific. The more specific you can be the better. And that may just buy you enough time to catch their interest to read the rest of the email. But to me, again, “Would you be friends with you?”, having a strong “Why” are two, really big components. And plant a seed, meaning if you wanna connect with Kevin Rose, better to try and plant that seed now than two years down the road when you really want to connect with him, and I’ll give you an example.

I know Tim Ferriss, for example. I met him initially in 2011, it wasn’t until I saw him five or six times in person that we really struck up a decent conversation. So again, don’t be scared to plant that seed. If you have an author that you love his work, send him an email or tweet and say, you know, “Love your work and here’s the reason why.” Or those kind of things. You never want to, ideally you never want to start an outreach with an ask.

Putting Principles into Practice

Andrew: What about, so maybe we can go hypothetical to more specific. You, on your podcast, you had Seth Godin on your show. So how did you, how were you able to…he’s a guy that’s obviously in huge demand for speaking, and I don’t think he does a ton of interviews especially. So how did you use those principles to get him on the show?

Jayson: So Seth is a unique example in the sense that him and Gary V., in the business circle and business environment, are probably the most accessible guys, in the sense that they read their own email. So they don’t have gatekeepers. They really strive, I know them both personally now, but they both strive to like reply to all the emails, and those kinds of things.

I remember my interaction with Seth. How it happened basically was, I went to an event that he facilitated and got huge value from it, took action on a lot of things that he shared, and then followed up with him months later telling him, “Well, this is what I learned from you , this is how I took action, these are the results I got, and would love to interview you for the podcast.” He said, “That sounds fantastic, but I’m…” I don’t know if he said he was, “busy at the moment,” but basically, I was very early on with the podcast and I guess there’s a lot of people in the pod-casting space. It’s very sexy right now to start a podcast, and not too many people are veterans like you that have been kind of doing it for a long time.

So oftentimes those big-name people wanna see that you can actually stick with the consistency of doing a podcast. So I think at the time, I was only at a couple episodes, he said, “Well let me know, you know, how you’re doing in six months or a year.” So I follow it up afterwards, I think probably six months or a year later and said like, “I’m still at it, love to know if you want to get on the show. Here’s some of the past guests,” and those kinds of things.

But I think I opened that with somewhat like praise and again, significance, in the sense that I took what he said, I took action on it, I got a result, and I followed up with him. So I kind of closed that loop. Because oftentimes as people who are thought leaders, you know, they write a book, they spend a year or two years writing this book, they put it out to the world, they don’t necessarily know how it’s received, or what is taken from it, what people take action on. And to me as an author, when I have people reach out to me, because I wrote a book called, “Mastermind Dinners”, and they take action and do a dinner themselves, and they send me a photo, I mean I will make time for that person, because that’s like the greatest expression of myself is that book, ultimately. So yeah, Seth Godin is a unique case, but that’s how that happened.

When To Make Intros, When To Not

Andrew: How do you decide what new interest to take? One of the things about networking is…especially I feel like today in like 2017, you get to a certain point and you have a lot of inbound requests, so people asking for your time to either help them or to connect with somebody interesting, but there’s a balance between taking interest and always kind of exploring serendipitous leads and relationships and being focused on cultivating the network that you have, on executing on what you need to get done. How do you find that balance, how do you decide when to take intros and when to, you know, kind of respectfully decline?

Jayson: Yeah, so it’s more of an art than a science. I mean at the phase that I am at, which is I have an abundance of friends and connections and contacts, for me the key to a strong network is subtraction and not addition. It’s one of those things that if I say yes to somebody who is maybe like a B player or C player, let’s say, I’m saying no to somebody that’s a relationship that I need to invest in, ultimately. So, and when I say B player or C player, it has nothing to do with success, but just really like the quality of a relationship. So yeah, I mean there’s something called the Dunbar number, which is the amount of stable social relationships that we can have, which is 150. So I try to be very conscious as far as who I spend my time with.

I look at my network almost like the Spartans. It used to be said that one Spartan was worth several men in another state, so I’m always looking for opportunities to refine who I spend my time with, and you know, weed out people if need be. So as far as, again it’s a fine balance. Because when it comes to introductions it depends how it comes, because I’m a firm believer that amazing people know other amazing people. That’s how my network grows at this point in time, it’s generally through introductions. And if somebody I know and trust says, “Hey I have somebody that I want to connect you with,” I almost always take that introduction, even if I don’t know it’s necessarily a great introduction, I don’t turn it down because I never want them to second-guess doing introductions in the future. Because you know, who knows? Out of five or ten introductions, one of them may be a life-changer for me.

So I always say yes to those introductions, or at least I try to. When somebody reaches out to me cold, again I always say it kind of ties into what we talked about earlier, I mean it really depends on how they reach out and, you know, I guess how promising they are as far as if I do give them feedback, will they take action on it? And those kind of things. But it’s one of those…a lot of people don’t invest in relationships because they can’t peg an ROI to it, but Steve Jobs once said, “You can’t connect the dots looking forward, you just need to trust that they’ll somehow connect. ” And the last thing I would ever want to do is kind of burn bridges or any of that kind of stuff. Because I’ve seen people, amazing people becoming increasingly amazing over time.

And for me to be able to invest in somebody like you would invest in a business, find somebody who’s undervalued and support them, believe in them, offer them guidance and advice. You know, five years down the road that could be the next Tim Ferriss, or 20 years down the road that could be the next Elon Musk, you never know. It’s a fine balance of managing your time and trying to kind of help everybody, but again, it’s, to me the key to a strong network is subtraction and not addition.

Rules for Making Introductions

Andrew: You mentioned introductions. You know, what are some good rules for making good introductions, for being a facilitator there? I think one of the most obvious ones is double opt-in, making sure that both people are interested in the introduction, so you don’t blind-side somebody with an intro that they don’t necessarily, you know, is not a good fit for them or they’re busy. What other rules, or maybe concepts, do you have for making, you know, introductions where both people are really excited about it? Is it primarily just about thinking through the value that both side is going to receive, and making sure it’s a reciprocal relationship, potentially?

Jayson: Yeah, well you touched on, I think, the most important factor that’s unfortunately not obvious, the importance of the double opt-in introduction. Again, it’s, I’m always blown away how many times I just get a random introduction in my inbox. And I’m historically not great at answering email in a timely fashion, and because of that, when I get a random introduction, it puts the onus on me to drop everything to reply back to that person as quickly as possible, not only to be nice to that person that is being introduced to me, but also to be respectful of the person who made the introduction, because I don’t want to make them look silly either.

So double introductions are huge. And I think again, vetting the individual who wants the introduction, if they ask for it, as far as what the desired outcome is and why they want to connect with that person, I think helps them get their house in order so that when you make the introduction it’s not like, “Hey I just wanted to connect with you because I think you’re interesting,” or something like that. So I definitely don’t want to glance over the importance of a double opt-in introduction. And I mean yeah, it depends on the context. If it is someone reaching out because they want to connect to a certain individual, when I do do that double opt-in and I reach out to the other individual and say, “Hey,” you know, “this is who I wanna connect you with,” I also don’t…I give them an escape in the sense that I don’t make it…I say like, “There’s no pressure expectations for this introduction. If you have no desire with connect to this person, or you see no value, then please just let me know.” And I can easily do the dirty work and say, you know, “He’s busy right now,” or those kinds of things. Some people still do double opt-in intros with me, but it’s so hard to say no, there’s no out. So I think that’s an important factor. The vetting is an important factor.

And then facilitating the introduction itself, giving context. I see so many people make that mistake, is that I’ll get this introduction, I’ll say you know, “Hey Joe, meet James. I really think you two will hit it off.” Then I’ve actually hopped in on a call with these people where there’s poor context for an introduction, and neither of us know why we’re on the call. So setting the tone as saying like, “Hey James, you know, I want you to meet John. John is a phenomenal entrepreneur, XYZ, this is, you know, he’s brilliant at this, and this is why I thought I’d introduce you and vice versa.” And also, it’s a great opportunity to stroke the egos of both individuals, and say, “Listen, I’m a huge…” And, you know, if it comes from a genuine place, that you love this person, or you respect them for these reasons, it’s just another opportunity to invest in those relationships. So those are some ways to kind of go above and beyond when it comes to introductions.

Value of Building Connections

Andrew: Seth Godin, he wrote the book called “Tribe“, and you know him personally and the importance of being a connector, and you’re kind of in that place too. You know a lot of different people, kind of built a career on that at this point. Where do you see the biggest value in being a connector? I mean you could kind of play devil’s advocate and argue on the other side, that being that connector, or that spoke, you connect a lot of other people but you yourself may not get the value, you’re just the conduit through which, people, you know, connect. And what are your thoughts on that? Like where do you see, in the end-game, the long-term game, you receiving value by connecting people the right way?

Jayson: Yeah, I mean it’s tough. Because people look at the work that I do, the value that is created from it, and they think that I should try to monetize those said relationships. So if I introduced two people and they started doing business to get there, I should get a cut. And I know some people that kind of approach business and life that way, but for me it just makes things transactional and makes things sticky. So I don’t do that. And I could be missing out on, again, a financial ROI, but you know, based on where I’ve been, I’ve understood the importance of relationships and how that has kind of showed up for me. You know, when you hit rock-bottom in life, and we all do, there’s two things that at least became clear to me back in 2012. One was, you never know the value of relationships until you really need it, and the second thing is the integrity of your word. And never tarnish your word and always invest in your relationships.

So to me, again, people who don’t invest in relationships because they can’t peg an ROI… I’ve been investing, I’ve been doubling down on relationships for the last four years, I’ve never felt more fulfilled, I’ve never been in a better financial position, to me it’s the safest and wisest investment you can make.

When to Leverage a Network

Andrew: What about when it comes time to leverage your network? Now leverage is maybe a bad, I mean, it’s a loaded term, it sounds very ominous. Like you’re sucking the life out of people. But do you think people do it enough, do you think they do it too much, should you come with a philosophy of building a network for a specific reason, or do you think that you should just build it to have because you don’t know…obviously it’s nice to have. You don’t know what’s gonna happen, so it’s nice to have there as an insurance policy, but what are some of the ways that you think through, you know, tactfully leveraging that network when the time is right?

Jayson: Yeah, it’s two-sided. I mean I, historically myself, I’ve been guilty of building out a great network but not asking for help when I need it. So I think that’s, again, a lot of us fall into that category, where we build out all these great relationships but have a hard time asking for help. So I think asking for help is the other side of the equation that a lot of us kind of miss, and to me it’s baffling how many times I’m struggling with something and struggling and struggling, and then I look at my peer group, and I’m like, “This guy has the answer. Why did I not reach out to him to begin with?” So it’s a fine kind of balance. It’s a fine dance.

As far as like the term leverage, yeah. It does have an icky feeling to it, but I totally understand why…it’s kind of position it as such. To me it’s like, my philosophy is just almost “Give ’til it hurts.” I don’t invest in relationships for the sake of reciprocity, but I never want to…almost look at it like a bank account. Like I’m investing in relationships, investing in the relationships, I never want to be in the position where, you know, I ask for something and it puts that relationship in overdraft. So yeah, I mean, I have people that I’ve invested in for the last…or relationships that I’ve invested in for the last four or five years that I haven’t asked anything. And it drives them nuts from a reciprocity perspective. They’re like, “Please, like let me do something for you.” I’ve just gotta get better personally at asking, myself, so that’s a personal kind of challenge I’m trying to overcome.

Anything Is How You Do Everything

Andrew: What kind of details do you read into that maybe other people don’t? And maybe a broader question than that is, do you read into small details? So for example, if you sit down with somebody that you’re thinking about potentially investing more in, or getting to know better, what kind of things that are seemingly inconsequential do you think kind of speak to larger character traits, or tell you something meaningful about a person, that some people might not…think are no big deal?

Jayson: Yeah, I mean I fundamentally believe how you do anything is how you do everything. So I’m always looking for those small little quirks in their behaviors and personalities. So if you’re out at a restaurant, how they treat the server, or those kind of things. Or how they talk about other individuals, you know? I had, for example, a really close mentor kind of friend of mine have a business fall-out, and I’ve been friends with him for 10 years, and I was not 100% on board with how he treated that relationship upon the exit. And I’m like, if it happened to his business partner, it can happen to me. Or it can happen to somebody I know. So I distanced myself from that individual. So I’m always looking for these very small cues that, again, some people would glance over. But how somebody treats somebody in their personal life is how they’ll treat them in business or in a business partnership, and vice versa. So I’m always looking for those small little cues of lack of integrity, or ego and those kind of things.

Avoid Self-Sabotage

Andrew: What about things that people do to sabotage their own networking? I mean, I can think of kind of a real obvious one, if you’re at some kind of event and if someone comes up and within 15 seconds they’ve shoved a business card in your face, that tends to be a pretty bad… So, I remember some of the times that that card just gets tossed out, and you send a pretty bad signal right out of the bat. Any other things like that that you think people are inadvertently doing to sabotage themselves, connecting with people meaningfully?

Jayson: I think, again, it’s the transactional side of things. I mean, a lot of the gospel in the networking space is very in transactional, the word networking, like some of the synonyms are like, “hob-nobbing,” and those kind of things, nothing I’d want to be associated with. So again, looking at a relationship from an ROI perspective right out of the gate, that you want to ask for something, and people are not stupid. I mean, we generally have a pretty good internal kind of compass and radar when it comes to somebody wanting something from us. So I think that’s where people miss the mark when they think of the term networking, which is a term I’m not, obviously, a fan of, but I haven’t come up with a better term. It’s just, again, very transactional, the reason you’re doing it is to further yourself, further your business, at the expense of others oftentimes. And that takes the form of, again, shoving business cards in people’s faces, and you know, unnecessary kind of follow-up and those kinds of things.

It’s In The Details

Andrew: What about the importance of small details? Things like personal details, birthdays, interests, family, you know, people’s backgrounds? It’s, you know, you’re trying to get to know people. These things, they do matter, but also, they’re easy to forget. So like, I guess what I’m asking is, how much do you think about those? Do you write them down? If you do write them down, do you keep them like in a CRM? Does that seem a little bit, once you get to that stage, does that seem like that’s almost like too robotic and mechanical, and at that point you’re not necessarily being really relational, you’re just, you know, kind of getting back to that more synthetic, fake relationship building? How do you think about how the small details tie into building genuine relationships and you know, how far you take that?

Jayson: I’m glad you brought it up, it’s absolutely crucial. You know, for me I have something called “the biggest fan” philosophy, which is, how somebody would look at investing in a business, I look at investing in people. So somebody tries to find an undervalued business and invest in it, I try to find people who are undervalued, diamonds in the rough so to speak, and invest in them. And that doesn’t have to be financially, it could be with time, it could be with a connection, it could be with just belief, right? I think as entrepreneurs, anybody in general, we all can think of a time when somebody believed in us when we didn’t necessarily believe in ourselves and the impact that had on us.

So for me I’m always looking for those little things and in the context of like these things that are unique to them, whether it be the name of their kids or where they grew up or what excites them, I mean that’s when you really start to build a deep relationship with somebody. So I capture as much of that as I can. Whether that be over email, if somebody says, “Oh, sorry I’m late, I had to put my kid to sleep.” I’ll be like, “Oh, what’s the name of your child?” Or, “How old is your child?” And those kinds of things. And I’ll capture that. Or if I’m in conversation at lunch or something like that, I’ll ask, and I’ll dig for things and it’s genuine interest, it’s not from me trying to extract things, but genuine interest, and I’ll pay attention to the things that matter to them. And after a conversation, or after a lunch, I’ll either write things in a notebook or I’ll do an audio recording and I’ll save it. And then that will go into a CRM that I use.

And it’s just one of those things, I did a lunch today where I have all these important points, like the name of his wife and you know, what keeps him up at night, and what he’s working on and those kind of things. These are all just great starting points for our next conversation. And I can tell you, man, I went to an event in 2011 and I remember meeting one guy named Mike, and his daughter was three months old and she was born blind. But she was getting better over time. And I still remember that. And six months later I followed up, and I’m like, “Oh, how’s your daughter?” And it had nothing to do with business whatsoever, but it was something that mattered immensely to him, and there’s a saying by Tony Robbins that if you want to influence somebody, find out what or who already influences them, and I take that, if you want to care about somebody, care about who they care about. Or care about what they care about. So I try to capture all those things. So obviously somebody cares about their daughter who’s three months old, so that’s a talking point for me. Or you know, what they’re passionate about, whether it be a sport or whatever the case.

Those are all unique points that deepen the relationship far faster than, you know, “How’s business, or how’s the weather?” and those kind of things. So that crucial component to building deep, genuine relationships and the only reason you put it in the CRM is, truth be told, we live in a time that we are absolutely overwhelmed. So to be able to create these kind of data bases of important quirks and facts and dates and names and those kind of things pertaining to certain individuals, I think is priceless, and it’s a best practice that I’ve been doing for the last couple years.

The State of Relationships Today

Andrew: What do you think about, the state…kind of more broadly, maybe away from networking for business, and just people’s relationships and community in general. What do you think about the state of community today, I’ll just say in North America? It varies throughout the world, but you know, North America, just to give us a framework, there’s an interesting book I’ve read, I’ll link up to it, called “Tribe” about kind of how so much of society today is less focused on community than it was even 50 or 100 years ago, and people have fewer and fewer close friends. I mean, you know, kind of generalizing a little bit here, but have you seen that? Like do you feel like that’s a systemic problem with a lot of our society today, or do you think that’s overblown?

Jayson: Yeah, so “Tribe” by Sebastian Junger is one of my favorite books of all time, by far. It’s an absolutely brilliant book. And I think social isolation is an epidemic. You know, we see it everywhere. I mean in Sebastian’s book, he talks about PTSD in the military and those kind of things. There’s even, bringing it back to business a little bit, A. Webber partnered up with Copy Blogger a few years ago, and they discovered that there was one email title that opened, had super higher open rates across industries. It worked for personal development, it worked for potty training, it worked for Viagra, it worked for selling cars. And that email subject line was, “You are not alone.” And I think it’s telling.

There’s a book called, “Never Eat Alone” by Keith Ferrazzi, he wrote another book called, “Who’s Got Your Back?” And in that book, he interviewed a thousand people and asked them one question and one question only, “Who has your back?” And surprisingly, 55% of people felt like nobody had their back. Even more surprisingly, 60% of the people who felt like nobody had their back were married. So I think we are in a time where on the surface level we feel like we are more connected than ever, but we’ve never felt more isolated, and it’s showing up everywhere. It’s showing up in the depression rates, suicide rates, especially amongst young, I guess professionals, who were young kids that have grown up on social media I mean, the suicide rates are just going through the roof.

It shows up in different, there was a TED talk on the 76-year…it’s still going on, it’s like a 76-year study on adult development. And basically, they found out the biggest predicator for longevity wasn’t your diet, wasn’t your exercise, but actually your social ties, and how tight your social ties were. So I think it’s not only like the business component where you’ll benefit from having tight relationships and that kind of stuff, but also mental health, physical health, longevity, overall happiness, like all of these things are tied to relationships. And again, it’s one of those things, I think we’re drowning in connections but we’re starving for community. We see it time and time again, and I don’t think it’s gonna get any better, unfortunately. So I think, you know, having a community whether it be joining a community like yours or creating a community of your own of like-minded individuals and peers, I think is absolutely priceless.

Mastermind Talks

Andrew: And kinda tying into the importance of community being in person, Mastermind Talks is kind of one of the keystone events, or the keystone event, you’ve really built up over the last few years. Can you give people a sense, who haven’t heard of it, what Mastermind Talks are and what you do differently to make it really unique from other events?

Jayson: I’ve gotta say, that was a beautiful segue, I’m very impressed. Yeah, I mean, so Mastermind Talks initially was just a fun project, but I always say that ignorance, hard work and confidence can go a long way sometimes. And I didn’t know what I was doing, and because of that it turned out to be a big success. And it’s been an evolution. I mean, our first event was geared towards wanting to be almost like the TED Talks for entrepreneurs. So it was very kind of content-heavy. But because the attendees were so curated, there started to be this community that formed. And when we had our first event we had 15 speakers. 10 of them came back as paid attendees the following year.

So every year we’ve kind of evolved and leaned more into the whole kind of peer to peer model and if…you know, we just finished our last event in Carmel in May and our next one is in September of 2018. If I could boil down the essence to anything, Mastermind Talks is great people, great food, great experiences in a beautiful setting with learning intertwined throughout the event. Because my belief is, the best learning doesn’t happen in a conference room, it happens at the bar, or it happens over yoga and those kind of things. And also, you know, if you want to hear someone like Tim Ferriss speak, and you know, he’s a friend, he’s brilliant, but to invest four or five days out of your calendar to sit down passively listening to a speaker speak to you when you can consume that content in a podcast, or you know, listening to a TED Talk on the way to the gym, it just doesn’t make a lot of sense, so we’ve really shifted from…we always say people may come to Mastermind Talks for content, but what brings them back year over year is community, so we are very, very focused on building that community. And we do it through our three-day live experience, and then we pull those relationships online throughout the year.

So now that we’ve done five of these, looking at the feedback forms, the most common words used are “community” or “family” and those kind of things. A lot of people feel that this is almost like a family reunion for them, which is a beautiful thing, because we have 150 people at our event, or a part of our community. I’d easily add 135 of them to my wedding. I mean, these are my favorite people on the planet. So yeah, it’s very much a community focus. I hate kind of lumping it in with events, but that’s really where it kind of started and that’s somewhat still what it is with the three-day live experience. It’s really just a beautiful community of people.

Importance of Live Events

Andrew: Yeah, I love the approach there. It’s kind of similar to what we do at eCommerceFuel for the events, because events are not impossible, but at least for us, I’ll speak for us, there are, especially for how much work goes into them, we do not do them to try to make money, because that is a…it’s just, our hourly rate would be, you know, dollars if not negative. And so, but for us it’s about really building the community and bringing people together and solidifying what we’ve tried to start, or at least catalyze online with relationships. So it’s cool you’ve done that as well, and we sat down in Toronto and you were kind enough to give me some…really share with me a lot of what you guys do at your events, a couple ideas of which I stole for this upcoming ECF live, so thank you, I really appreciate your thoughts on that, man.

Jayson: Well, I’m a huge fan of what you do, and I was…as we kind of talked about it offline, I came and checked out the meet-up you had in Toronto, and you had a phenomenal group of people there, and especially in the e-commerce space, especially entrepreneurs in general that play online mostly. Again, they miss out on that face to face component, and it sounds like you’re doing a beautiful job bridging the two, so honor the work that you do.

Andrew: Well thank you, I appreciate it. It’s a lot of fun to do. But hey, in closing, Jayson, I want to talk about your podcast, “Community Made.” Obviously, people that are listening to this, it’s something I think would interest them. And it’s, you’re getting ready to release your second season, it’s focused on relationships. Can you talk about what, you know, if people tune in to that, what can they expect to hear?

Community Made Podcast

Jayson: Well, basically I’ve been somewhat positioned as like the master kind of networker, connector, that kind of stuff. And to me, I haven’t put that much value on it, because it felt like it’s kind of come naturally, but I’ve really over the years, kind of dissected the things that I do and those kind of things, and basically, I’m putting it all in to season two of the podcast.

So season two is all about how to grow your network, and that includes how to network at events as an introvert, and just kind of grow your network in general, especially in today’s day and age. How to nurture your network, and I think that’s something, again, in our current kind of social fabric is important to do, because we have a lot of connections but again not a lot of really deep connections at that. There’s a saying, “It doesn’t matter how many friends you can count, it matters how many friends you can count on.” And I believe that to be true. So the importance of deepening those connections and then kind of amplifying. So whether that be building community and those kind of things. So season one was all about the notion of scale, where I talked about my views on scale and I had Gary Vaynerchuk on and a bunch of other people, and season two is all about relationships. And so I’m really excited about it.

Andrew: Love it. Yeah, communitymade.com, I’ll link up to it and I’ll be listening to it when it comes out. When does that season two hit?

Jayson: That’ll be mid-January, 2018.

Andrew: Perfect. Just in time to gear up networking for 2018, yeah.

Jayson: Exactly, that’s why we timed it that way.

The Lightning Round!

Andrew: It’s almost intentional, it sounds like. Jayson, one last thing I want to do in closing here if you’re up for it is do a lightning round. Is that cool with you?

Jayson: Yeah.

Andrew: All right, so first question. If you had to identify the number one thing you’re trying to optimize your life for right now, what would it be?

Andrew: And I’m not super familiar with him. What…if you can maybe in one sentence, what is his fundamental stance, or what is it that he stands for that you disagree with?

Jayson: I mean he’s well known in the entrepreneur space. Similar…I don’t know if you’re familiar with like Ty Lopez? I don’t have anything against Ty Lopez. Teaching people how to start businesses and those kind of things. Yeah, kind of the whole notion of building business at all costs and also just really, really not a fan of his marketing tactics.

Andrew: How much money is enough? What would be your number of money in the bank where you’d be able to say, “This is good. This is enough.”

Jayson: I…yeah. To me it’s almost like not a set number in the bank, as silly as it sounds. It’s more like a consistent cash flow. Because I feel like if I have x amount of money in the bank I’ll probably find a way to spend it, as opposed to finding consistent cash flow, that would be a little better than if it came up to me in chunks. But really probably, I mean my monthly burn, to live like a really great life is about $15,000 a month. So whatever that would be for the rest of my life is probably…taking into account inflation, is probably whatever that number comes out to.

Andrew: Okay, nice. What’s the worst investment you’ve made in the last 10 years?

Jayson: That’s a tough one, because even when you have bad investments you try to justify it as a learning experience. We’re all, as humans, we’re meaning seeking machines. So even if something was terrible, you’re like, “Oh, well there was a message in there.” So I’m having a hard time identifying…it’s probably something around time, because I mean financially I could care less. Because I mean, I’ve lost money in bad business partnerships and those kind of things, but to me time is obviously irreplaceable. So it probably revolves around time, I just can’t put my finger on it right now.

Andrew: Now, on the flip side of that, what’s the best investment, outside of your core business, you’ve made in the past 10 years?

Jayson: Relationships.

Andrew: Softball, baby, I just threw that one right up for you.

Jayson: There you go, thank you. Yeah, no. I mean, absolutely, without a shadow of a doubt, it’s relationships. It ties into, I guess, my business on some level for sure, but even if I wasn’t in this business, I would be doubling down on relationships all day long.

Andrew: And finally, what was the first CD you ever owned?

Jayson: What a curved ball. Softball to curved ball. Honestly, it wasn’t a CD, maybe I’m dating myself, it was a cassette, and it was Snoop Dogg and NWA.

Andrew: That’s awesome, I love hearing the answers to those. Jayson man, well this has been a ton of fun. Thanks for coming on, and if you didn’t catch it the first time through, make sure at the minimum, to check out communitymade.com, that’s where Jayson’s got his podcast. Season two on relationships, dropping in January, and Mastermind Talks, we’ll link up to that website, mastermindtalks.com if you’re interested in learning more about the event. There’s a really cool video that kind of highlights that, so if that’s something that you’re curious about or want to check out, I highly recommend it. Jayson, it’s been a lot of fun, thanks for coming on. Thanks for all your help and support and advice you gave me in person in Toronto, and looking forward to catching up soon, man.

Jayson: Awesome, dude, I appreciate these well thought out questions.

Andrew: Thanks buddy.

Jayson: See you, brother.

Andrew: That’s gonna do it for this week’s episode, but if you enjoyed what you heard, check us out at eCommerceFuel.com where you’ll find the private vetted community for online store owners. And what makes us different from other online communities or forums is that we heavily vet everyone who joins to make sure that they have meaningful experience to contribute to the broader conversation. Everyone who we accept has to be doing at least a quarter of a million dollars in annual sales on their store and our average member does seven figures plus in sales via their business. And so if that sounds interesting to you, if you want to get you know, check in with a group of experienced store owners online, check us out at ecommercefuel.com, where you can learn more about membership as well as apply.

And I have to, again, thank our sponsors who helped make this show possible. Klaviyo, who makes email segmentation easy and powerful. The cool thing about Klaviyo is they pull your entire catalog, customer, customer and sales history to help you build out incredibly powerful automated segments that make you money on autopilot. If you’re not using them, check them out and try them for free at Klaviyo.com.

And finally, Liquid Web. If you’re on WooCommerce, if you’re thinking about getting on WooCommerce, Liquid Web is the absolute best hosting platform for three reasons. One, it’s built from the ground up for WooCommerce, and optimized by some of the best industry professionals in the WooCommerce work best space, they really know their stuff. And it’s highly elastic and scalable as well as comes with a whole suite of tools and performance tests to optimize your store. You can check them out and learn more about their hosted WooCommerce offering at ecommercefuel.com/liquidweb. Thanks so much for listening, really appreciate you tuning in, and looking forward to talking to you again. Thanks, bye.

Want to connect with and learn from other proven e-commerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight-knit, vetted group for store owners with at least a quarter of a million dollars in annual sales. You can lean more and apply for membership at ecommercefuel.com. Thanks so much for listening and I’m looking forward to seeing you again next time.

Raphael Schneider is a fascinating guy. He left the law profession to start GentlemensGazette.com, his own line of classic men’s goods. He’s also a YouTube Wizard and has built a channel with more than 125,000 subscribers, no small feat in the age of influencers. In today’s episode you’ll learn: The most important element to optimize in your YouTube videos What percent of subscribers actually end up watching your videos The massive ways YouTube has changed in the last 2­-3 years Subscribe: iTunes | Stitcher (With your host [...]

Andrew: Welcome to the eCommerceFuel Podcast. The show dedicated to helping high six and seven figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow eCommerce entrepreneur, Andrew Youderian.

Hey, guys, Andrew here and welcome to the eCommerceFuel Podcast. Thanks so much for tuning in to the show. And joining me today I’ve got Raphael Schneider from the Gentlemansgazette.com, and Raphael is a fairly, somewhat new member to the forum and had been one of the most standout new members in terms of just engaging and sharing his knowledge. Incredible guy. And particularly has a ton of experience on YouTube, building up a channel there.

He’s built up a channel to almost 130,000 subscribers, generates a tremendous amount of his businesses traffic and brand recognition, and kind of pop a funnel attention on YouTube. And his videos are just really well-done, long form in-depth, highly well-edited, a great job with that.

So I wanted to bring him on to talk about YouTube and how to build a channel there. We dive into a lot of stuff. We talk about how to use YouTube Analytics to really improve your videos and get better watch times. We talk about what are the most important thing to optimize on a YouTube video is, the big ways that YouTube has changed in the last two to three years, you know, why he likes the fact that it’s so difficult and so expensive to produce high-quality video content. He sees a very strong, a real advantage there, if you’re willing to invest.

Also, we talk about what kind of vanity metrics like he has a hundred thousand plus subscribers, is that actually valuable? Like, do those people that subscribe actually watch his videos? We talk about the percentage of people that watch that are subscribed versus just the positive effect you see from having your videos, you know, on YouTube.

So, lots of good stuff. Raphael’s obviously great guy who knows the space well and so hope you can join the discussion on YouTube with him.

Quickly, before we jump in though, I wanna thank our two sponsors who helped make the show possible. First, I wanna thank Klaviyo who makes e-mail automation easy and powerful. And a good chance you’ve heard of Klaviyo by now. Their killer feature is the ability to pull in a ton of data, allow you to create automated email flows through highly-targeted and go out pretty much indefinitely once you take the time to set them up and make you money.

But, today, I wanna touch on their Email Builder. Whenever I try to build emails that go out that are anything other than just plain text, they end up looking like they came out of 2002. They look horrific. And Klaviyo has a great Email Builder that solves that problem. It’s drag and drop, it’s got a lot of templates built in, it renders nicely for mobile, for desktop and it just it takes the pain out of building emails that don’t look horrific.

So if you’ve experienced that pain as I have, you’ll enjoy their email builder. If you’re not using them for email marketing, check them out at Klaviyo.com, that’s K-L-A-V-I-Y-O.com where you can get started with a free trial.

And, secondly, I wanna thank the team over at Liquid Web who is now offering completely managed hosting for WooCommerce. So if you’re at WooCommerce, two reasons you might want to use them. One, it’s a highly elastic offering. It allows your store to scale up very easily with surges and traffic and keep you online.

Secondly, they have a very cool staging environment that doesn’t only let you test UX changes, but lets you stress test your store for a lot of different scenarios. They have over 25 different data sets of situations that can happen where you can see what happens to your store before it happens. A couple of fun facts about them, they’ve been doing it for 20 years. They own all their own data centers which is really cool. No AWS for these guys, they actually own the servers, the racks and can swap out any hardware that fails within 30 minutes.

And their team is just impressive. I met them at a conference this summer. Their team over there is headed by, on the WooCommerce side, Chris Lema, who if you’re in the WordPress or the WooCommerce space, you’ve heard of him. Their team is one of the reasons I agreed to have them as a sponsor of the show. So if you’re on Woo check them out, you can learn more about them at ecommercefuel.com/liquidweb. All right, let’s go ahead and get in today’s discussion.

From Law School to eCommerce

Andrew: Raphael, so you were in law before you began your story, before you began Gentleman’s Gazette, is that right?

Raphael: Somewhat. I went to law school. I graduated from law schools in Germany and the U.S. but I realized it was super boring and I wouldn’t be happy doing that while I was in law school. So I never practiced and I never actually became an attorney because I was like, “This is just not for me.”

Andrew: And that was in 2008 or 2009? Because you started selling things in 2010, right, via a Gentleman’s?

Raphael: Actually, we started in 2010 with the writing and then by the time the work permit rolled around we had our first advertiser. And so I was like, “Oh, that’s awesome. How long does it take me to make a $100,000?” And so I looked into, you know, blogging was still somewhat new at the time, and I figured out, “If I work hard for five years and do things right I should be able to make a $100,000 a year.” And so I was like, “Okay, let’s try to do this.”

And my wife, you know, was making sure we had bread on the table, so she had a regular day job and I could commit time to that. And then in 2011, we converted everything to an LLC. By then, you know, I had realized, “Well, with advertisers, it’s actually not always that easy.” Because our first advertiser he just stopped paying. I think he had a hard time. And he wanted a long-term contract and we made that but then he just, you know, didn’t pay. And it was like, “That sucks, you know, and, yes, I could go sue him but it’s probably not worth my time”. So we just tried other things.

And so then a lot of people asked me and said, “Hey, where did you get those glove?” And I would have to say, “Oh a flea market in Vienna.” So not really helpful. And so I thought, “Well, why don’t we create all those things that people asked me for and that I can’t find?” And so we said, “Yeah, let’s do this.” And it was always clear from the get-go that we wanted to do something that was quality because that’s what I was interested in.

And at the same time I realized, you know, from a business point of view trying to compete with Amazon and Walmart on a commodity level is not going to benefit us because we won’t be able to make that. On the other hand, if we have a specialized niche business that would be much better from a business point of view.

Getting To His Revenue Goal

Andrew: How long did it take, you mentioned kinda the goal to make 100K per year, you started in 2010, how long did it take to hit that goal?

Raphael: I think we did that in 2013, probably. But, at a time, we also reinvested a lot into the business. So we hit that threshold a lot faster than I thought we would, but we also decided, you know, in 2011 that we wanted to create this brand. And so while looking for a name, my wife said, “Well, how about an English country house?” And so it was like, “That’s a good idea.” And then we came up with Fort Belvedere because I said, “British country house is not related to clothing.

How can we combine the two?” And Fort Belvedere was the home of Edward VIII who later became the Duke of Windsor, who was always very well known for his style and for his clothes. And so that was the connection for us. And we were like, “Great, domain available. We can do that. There’s some history behind that. We can do that.”

And then I started to kind of design products, develop things and we didn’t sell actual products until October, 2013. So it took us a good two years from kind of brand inception to selling things.

Building Proprietary Products

Andrew: And tell me a little bit about your product line. So you have your own brand that you guys designed. Do you guys design all the things you have from or how much of it is proprietary? Do you design like those gloves you mentioned, where you contract with someone and you kind of spec out what you want, they’re really something that follows your vision and design versus things that you bring in that are really high-quality products but maybe you private label them from other manufacturers?

Raphael: Yeah. So, for us everything we do is like our design. So you cannot find these products anywhere else. And it’s more difficult than to just slap your name onto something and then sell it as your own. But at the same time, it’s also much more difficult for others to copy us. So you mentioned the gloves, for example, right? So I go out to different tanners and source the glove leather. You know, we make specifically the colors that we want.

Then we create together with the glove makers the patterns for our gloves. So you won’t find that pattern anywhere else. Then those gloves are sewn to our specifications. We say, “We want this kind of aligning. We want you to use this kind of a thread.” And then they create those gloves for us, and it’s a unique product. And it’s the same with ties or anything else that we offer.

He’s The Designer, Too!

Andrew: And you do most of that? Obviously, you have a real interest in fashion. Do you have someone on your team that is the primary person who designs all of those and kind of takes ownership? Or are you the person, along with all the other roles that you have to wear, are you the one who is the primary designer driving that process?

Raphael: I wish there was someone but I’m the creative director in that sense. I’m the designer. And I think what helped us in that way was that I always had that vision of, “Work once, make money forever.” And that was reflected in our content and in the sense that I wanted to write one article that could be read over and over again. You know, evergreen content.

And with our products and what I believe in, like classic men’s goods, it’s a timeless style that doesn’t change, you know, in 20 years. So it works well for us in a business sense too because I don’t need to change my product clients every six months and need to redo the marketing. So our, you know, personal beliefs of quality and longevity and timelessness perfectly align with our business goals.

And because of that, I have time I think, you know, because of that I have the time to dedicate to the designing still because unlike other stores maybe they have to kind of, you know, rewrite their product descriptions every six months. And then we don’t have to do that.

Andrew: Yeah. It’s a great long-term approach, especially in an Amazon era. One thing I noticed when I was doing some research on you is, you’ve got a team that sounds like eight people right now, is that right?

Income Vs. Hourly Employees

Raphael: Well, yes. So basically, you know, it’s my wife and I are the only employees. And then we have a two-full time customer service VAs, one graphic designer with VA, one full-time VA who’s an assistant, one part-time VA who is an assistant. We have several contract writers, videographers and editors and then a full-time in the center.

Andrew: And you had mentioned in a previous interview that you really like to manage instead of by hours, instead you manage based on outcomes. I’d love to hear you talk about that a little bit. I mean, the philosophy makes a lot of sense but, how do you structure that? So if you maybe, for example, if you wouldn’t mind talking about some of the outcomes specifically you look forward for the people when you’re managing them.

Raphael: Yes. I think, you know, we’re of a younger generation. So, for me, it doesn’t matter when people work or where they work, as long as they get things done. And I just realized, you know, if you have other interests in your life than work and if we can combine it it’s great for you and it’s great for me. So if you spend, you know, 20 hours researching an article but someone else can do it in five, well, that’s too bad for you. But I just look at the final article and I say, “I can pay you this much for a final article.” And that’s what it is basically.

Now, the limitations of this model comes into play when you have like a video and you’ve won, for example, a super high-quality edit. Right? I do not wanna limit the editor and say, “Hey, I only pay you a fixed amount but I want you to work a lot longer on this video than on others.” Then you have to kinda switch and give people like an hourly rate or something and say, “Hey, I pay you more simply so you can make that work.”

How To Build Subscribers on YouTube

Andrew: Well, I’m really excited to dig in with you about on the specialty side that is YouTube. So you got about 130,000 subscribers on YouTube right now in your channel, which is impressive. And how long did it take to get there? Did you start right away in 2010 when you started doing content on YouTube? Or was that something that…I’m trying to guess as a how long it took you to build up to 130K subscribers in terms of years and also in terms of maybe your publishing schedule, in terms of how often you’re putting out content.

Raphael: So, you know, back when we started I bought a camera and it then they had like a 720p, you know, HD feature. And we took a few videos, like short ones and put them up there. But I felt that, at the time, I wanted to have a higher-quality production level and so that kept me from going. And so we basically stopped and didn’t restart YouTube until like October 2014.

So, looking back, I wish I would have just started in 2010. Because even if you start, you know, at a lower level, by doing it you learn so much more and so much faster. And if we would have just started earlier we probably would have 2 million or 3 million subscribers today.

A Lion’s Share of Sales from YouTube

Andrew: And what percentage of your traffic and sales do you think you know, and maybe it’s just a gut reaction because I know it’s hard to track directly, but, how much of your business do you attribute to the presence you’ve built on YouTube?

Raphael: As you said, you know, it always depends on what your attribution model is. Is it like the first click, is it the last click, do you consider the clicks in between? And we try to have a model where we look at various touch points because we know we have a longer sales cycle. I think to date our social media has produced $180,000 in revenue. And the lion share from that is from YouTube.

Andrew: Interesting. Do you get most of your traffic from YouTube or does it come from other places more predominantly?

Raphael: No, it’s like many platforms, you know, people like to stay in a platform. People on Facebook like to stay on Facebook, people on YouTube like to stay on YouTube. However, as you know, people rarely, well, you know, watch a video, click on something and then buy directly. But then just being aware of you and what you do and getting to know you and liking you, leads down the line to a sale, maybe in six months or a year. And that’s I think, where all these sales come from.

It’s not a direct sale. It’s more first touch point, second touch point, maybe they sign up for emails, maybe they subscribe to our channel and then ends up in a sale from there.

Andrew: So that 180 that you mention from social or from YouTube is really the stuff you can attribute directly to YouTube. But you think there’s a lot, just kind of a much broader halo effect that you can’t necessarily see in Google Analytics but you’re pretty sure is there.

Tracking First to Last Click

Raphael: Yeah. Well, we reuse not just Google Analytics because that was one of the pet peeves with Google Analytics was that the attribution I thought was always very difficult. And I’m not a big fan of attributing 100% to my first click or 100% to my last click, but I realized that without my Facebook posts, and the tweet, without my e-mails, that sale wouldn’t have happened.

At the same time, I wanna know what’s the starting point for most people, you know, because maybe, let’s say, I would just look at direct sales I would think YouTube is not worth it when in fact a lot of people who start out there eventually become customers.

Yeah, we use lots of parameters and stuff and we track things very closely to just understand what the touch points are and what our kind of customer journey is from first inception with a brand to actual sale.

Raphael’s Attribution Funnel

Andrew: Yes, I mean, maybe we could actually dive into that just a little bit. That’s fascinating. So, how do you have that set up if you could maybe talk a little bit more about that? Do you have a final set up that just in Google Analytics that tracks, that gives you, that shows you the attribution kinda funnel all the way through and then you just you really give a lot of weight to YouTube bringing people into the top of the funnel and then some of those other methods like email, other methods to close the sale? How do you think about them? Maybe you can talk about that a bit more deeply.

Raphael: We use a tracking software called Wicked Reports, and it works a lot on parameters, UTM parameters which you can also see in Google Analytics as campaigns, for example. And then you can just set it up and finetune it and change the attribution after the fact because it records all the data, basically.

And, yeah, we have a very thought out email funnel system currently use Infusionsoft to do that. I mean, there are many ways you can build it out. I think the hard part is just building it out and mapping it and providing value to your customer and nurturing them to that sale. And then, of course, once the first sale, how do we get the second sale, the third sale, the fourth sale and so forth?

The Gentleman’s Sales Cycle

Andrew: So you’ve get, for example, on a YouTube video with some of those kind of in-video little clicks that can take people to your site or any links you put in the comments, you’ll put UTM characters or parameters which are those kind of attributes in the URL, so those get tagged over. And then you’ll do, of course, you’re pretty religious, it sounds like by doing that for any kind of email or social you do and so then you can see that whole path in Google Analytics? What is your average?

Roughly, how long does it take for somebody, you know, once they come to you from, let’s say YouTube, to end up buying? Like what’s the sales cycle look like for you guys?

Raphael: On average, I’d say eight months.

Nurturing Customers for the Long Sale

Andrew: Wow. Eight months? That’s crazy. That surprises me. Okay. Interesting. So, for you, I’m guessing a huge part is the nurturing, so I’m guessing when you have people land from YouTube onto your site you’re not trying to push them on the sale, you’re probably trying to do something like to get them to opt into your email list most importantly.

Raphael: Exactly. And we’ve never been hard on sales, you know, we’re never like hard salespeople. Yeah, it’s just interesting to see that. Of course, you sometimes have people who come, you know, and just buy right away. But it’s the idea that, you know, we create a brand that’s recognizable and people come back to us over and over again. And, over time, you know, we also add more products to our lineup.

So a customer can spend more with us. And, of course, you know, ideally, I want a customer lifetime value of $5,000 rather than $300. So we’re working towards that end and keeping customers on and not just go for them one-time sale. It’s part of that long-term growth strategy.

Building Trust with Customers

Andrew: Yeah. You’re playing long ball on the product selection proprietary, playing long ball on the customer. You know, it’s harder to get them but if you do them you can build trust and they’re gonna buy more from you over time given your niche. I was looking some of your gloves, they’re beautiful clothes. And like any high-quality thing they’re not cheap but, you know, $300 for a pair of gloves something where you get to build a lot of trust with somebody before they buy those, I’m guessing.

So, how do you think about that? Like I’m gonna kind of make an assumption that your email list is, once you have someone, it’s probably the way that you can best nurture them. How do you use that email list to really build trust and credibility? Do you have any intentional ways that you do it? Or do you just kind of think more of the thought process that, “If we really have great quality content, ala our YouTube channel, really high-quality blog posts, people will over time justsee that quality consistently and they’ll come to trust us”?

Or do you have any little secret kind of under the surface, things that you do in addition to that via your email list?

Raphael: I think, you know, we’re looking at other, especially eCommerce places. They oftentimes make videos about their products, right? So it’s primarily a sales tool. We have a different approach in the sense that we started helping men first, and to this day we make a lot of videos about things that we do not sell. So we truly show people, you know, “We’re here to help you not to just sell you something.

I don’t just want you to buy something. I want you to buy something that you’re truly happy with because if that’s the case, you know, you talk to your friends about it, you come back and I want you to buy something that you’re proud to wear.”

And I think that separates us from the majority of people out there who just try to get for…or just go for a quicker sale.

A Case for Longer Videos

Andrew: Let’s talk about some of your videos. So, you know, a lot of those people on YouTube say shorter is better, people have no attention spans, etc., etc. But I would say if I had to, say, the classic Gentleman’s Gazette video, you know, you’re in the 8- to 15-minute range, it’s, of course, very well-edited and well-produced.

Can you give me a sense of with something like more substantial video content like that, what’s the cost to film and edit something like that in terms of time and in terms of money you have to pay, either your time or time that you have to pay for contractors?

Raphael: There are lots of things in here. Before I answer that question, let’s talk about the length. I agree with you, attention spans are short especially in the prime YouTube demographic which are more, you know, millennials, not 65-year olds. At the same time, it always helps to look at YouTube as an entity that it wants to make money, right? Google Alphabet, YouTube, all the same thing.

So they had a big shift in the sense that they said, “We don’t just want the views, we want watch time.” Because the more people watch on YouTube, the more attached I get to YouTube, the more at stake click, the more valuable they become to YouTube.

Now, if I, as a content creator, can create content that keeps people on YouTube longer and it’s not a relative measure, it’s an absolute measure. So let’s say I have a video out there that is a burning fire for three hours and people watched for 90 minutes, they click three times as many ads. That’s more valuable to YouTube even though they may just have watched 20% of the video compared to, let’s say, a five-minute video where people watched 90% of it because it’s a how-to tutorial.

So keeping that in mind is something where I’m like, “Yes, I wanna create video, I wanna have people with a long watch time.” At the same time, I like good quality in-depth content and that automatically requires me to make a video that’s longer than three minutes. So it kind of go in the same direction from all sides. I wanna create a video that’s evergreen and provides really solid value, and that requires me to have, you know, eight to 15 minutes versus two to three.

Of course, unlike a podcast, YouTube has lots of stats which you can exactly see when a drop-off occurs. So maybe you speak too slowly or maybe you say something, maybe it’s a blurb that’s too long. You can immediately see where people drop off. And using that data you can improve the audience retention on your videos over time.

A Constant Look at Analytics

Andrew: When you go in with videos, how often, or if at all, do you go in, take a video, look at the analytics, see a big drop-off time in the two-minute mark and reshoot that to try and make it more engaging or less slow at that point?

Raphael: We constantly look at analytics and try to use the data to just, you know, increase our average watch time. It’s like every video we know, and if we have an outlier I know, we dig deeper and see what the problem might have been.

Metrics to Look At

Andrew: Interesting. And what are the biggest cues out there when you see the metrics you look at? Do you just look at drop-off where people leaves a video? And is that the biggest thing you look at? And if that’s the case, how do you determine what the problem is? Is it just kind of making an educated guess based on, “Okay, well, this is where they’re dropping off,” so, having some friends watch it or trying to be critical of your own performance or the content there and try to be able to shorten it up?

Raphael: Usually it’s quite obvious because you know you can see exactly what you say in a drop-off. So you just see that portion and then you see when it normalizes again. So you see a section and you can tell, “Oh, this is what’s happening here,” right? Or, I mean, you can also see if you publish a video and it’s very popular from the get-go, you know, you can see that’s something that resonates with people more.

And, of course, we also have our articles and stuff. So you know kind of if something is popular you can tell right away, and you can try to understand why is it popular, come up with a hypothesis of why that’s the case basically.

Cost and Time of Videos

Andrew: What about time and cost to edit? So, let’s say, an average 12-minute video that you put out there, what does that costs in terms of time and the money?

Raphael: I guess it’s little harder for us and it depends on how you break it down, right? There are fixed costs like a studio space like the one we have would probably cost $2,500 a month. The gear we have, you know, 25, 30 grand upfront. And then the variable cost is, I would say, the filming and editing of the video is like, for us, to $250. Then, you know, you need the scripting which is either me, or if we have an existing article someone else can do that, thumbnail creation by the graphic designer.

Then you have the posting itself. And, you know, the transcribing of the video, adding cards, adding all the links, doing all the parameters, all that stuff. So, I’d say overall, we’re at $350 a video.

Andrew: For a variable cost?

Raphael: Variable costs, that’s not the fixed costs for brand and gear.

Andrew: So 30,000 for the studios. So that surprises me that would be that much. Can you maybe talk about the different parts of your studio and the different investment levels for those?

Investing in Professionals

Raphael: Well, you know, just like with many things you can just, especially today, you know, you get an iPhone and have 4K quality. Well, I, in the very beginning, you know, decided that photographers were quite expensive, photography and, you know, it’s not like you always get your entire lineup at the same time so you need to book them and everything. And I always liked photography so I decided, “Okay, we do it ourselves.”

Because of that we could invest in better quality gear and then once have a system, you know, you have your entire lens range of DSLR equipment, that’s quite expensive.

Then you have bodies, you know, that they come out every few years. So it’s like we have two cameras, it’s like 5K for the bodies. You have to buy that every like, let’s say, three years. Then lighting, you know, you can spend $20,000 on a lighting setup or $200. It’s all light at the end of the day, but the Color Rendering Index, or how accurate are my colors in the video ranges greatly, also the way things look. And for us, you know, having products that look exactly the way they should if we print them, can help minimize returns for example.

And, again, I am a quality person so I like having good stuff because I think over time it pays a dividend. And, could you use a less expensive year? Yes, I like to choose better stuff where I know it works. And it’s also something we’ve built up over the years, you know, like the lens lineup it’s not something you need to replace very often because they last from long time.

YouTube’s Changing Landscape

Andrew: How has YouTube changed in the last two to three years? I mean, one thing I’ve noticed is I feel like it, maybe you could probably for the internet as a whole. But advertising is just seems like the advertising has got ramped up significantly. Even last night, looking at two or three videos. I remember a couple of years ago you might see a casual video on YouTube, but I feel like now at any time you load any video you’ve got anywhere from a five- to 20-second ad that you get to sit through.

Maybe that’s one facet. But just maybe even more broadly in terms of just YouTube in general from a content creator standpoint, what’s changed over the last couple of years?

Raphael: Well, quite a few things. What you mentioned with ads, I think, you know, for a long time ads were kind of underappreciated in YouTube because people look at AdWords but not at YouTube. Even though there’s lots of inventory. And, for a long time, it was quite cheap, you know, and you could run those ads for either 30 seconds or…yeah, it was either 30 seconds at the end of the video, and if people wouldn’t get there and wouldn’t click, you wouldn’t pay for it.

So it’s kind of like free branding. Of course, people kind of, you know, try to do that and get in front of faces in a way.

The other big change was YouTube going from views as a main metric to the watch time. They also kind of depreciated the importance of comments or likes. There was a time, you know, when you just got 5,000 comments right away out of the gates, YouTube would promote your video big time because they assumed that that level of engagement was indicative of the quality of the content. That has changed.

Now it’s more about the size of your channel. So if you already have a big channel with 200, 300 videos and you can produce watch time, that’s when YouTube really promotes you and you can get that kind of hypergrowth.

They also added things like, you know, 8K support or YouTube Live. A more significant change, I think, was subscribers. People oftentimes look at subscribers and think like, “Wow, 130,000 subscribers.” I mean, you said it over 1 million subscribers. I’m more like, “You know, how much do my subscribers actually watch?” And it’s a metric you can see. For us run now, it’s 30% of our watch time comes from subscribers, which is good.

At the same time, if you look at the views, you know, if you get 10% of your subscribers to watch a new video within the first 24 hours, that’s very good. There are a lot of places out there with millions of subscribers that don’t get much more views than we do with, you know, a fraction of subscribers because they’re less engaged.

That’s probably partly because back in the day, if you subscribed you would get a notification from YouTube about a new video. Now, when you subscribe you may occasionally get a notification. So in order to be notified by a push notification you have to click that little bell next to the subscribe icon. If you wanna get an e-mail about a new video, you have to go into the notification settings and set it up. So hardly anyone does that. So it has become much more difficult to reach subscribers. I think that was one of the big changes that I have seen.

How to Make a Great Video

Andrew: What are some of your principles for making a really good video? I mean, you talked a little bit or touched on kind of your propensity for in-depth quality content. Maybe if there’s anything you wanna add to that or any other, when you sit down to put a video together to get sent out and just get the Gentleman’s Gazette branding on it, what are the core non-negotiable elements it has to has?

Raphael: Well, I think we have two different approaches, you know, one is, more like an SEO approach, or you look for keywords that people are searching for. The other one is just knowing our core target customer and thinking about what they would find valuable, right? It all starts there. So have your title, have your scripts, like we always script or videos because without that there’s too much fluff, there’s too many ands, too much time that gives people a chance to click away. So that always has to happen.

I also like to kind of introduce people and tell them what’s in it for them when they watch the video then add a certain branding element and then go through. And then you just experiment with things and then listen to feedback. For example, lately we started adding at the end of every video a complete outfit rundown of what I was wearing and why. And people really like it. So, you know, for us it’s a great way to showcase our products without being too salesy and, at the same time, accommodating the demands of our viewers.

Using a Keyword Approach

Andrew: You mentioned kind of the keyword approach, let’s talk about that a little bit. How much are you focused on every video that comes out optimizing around a keyword or a phrase that you know is getting searched on? How much does SEO tied to your strategy? And then maybe we can talk about how specifically you optimize videos for a SEO.

Raphael: SEO for us, as a company, has always been hugely important partially because when we started the company we did so with $300. That was it. And so I couldn’t buy traffic. I had to kind of organically get it. And then I learned a lot about it, so in the early days it was kind of consulting in SEO on the side. And then we did the same thing for all of our articles because they were evergreen content. So we always wanted to optimize for as much as we could, try to build links. And with YouTube it’s now different.

Think of it as a post on your blog, you know, you can add links to it, or send links to it, which gives it higher ranking in Google but also more importance in YouTube. You can add tags, you can add 5,000 characters as a description which, you know, can be keyword-rich. You can use cards, you can transcribe it. You can do all those things to optimize your video. That’s basically like any other product page or post.

Andrew: So when you say of optimizing cards, for example, are cards the…and I’m not someone who understands, you even used hint to do much apart from just casually launching on it. I’ve never really post it as a meaningful channel, but cards, is that when you’re watching something you’ve got? You know, you mentioned your gloves for example, you’ve got a little card that pops up that’s a clickable link that takes people to your glove page on your store, is that what the card is?

Raphael: Exactly. It’s like a little exclamation mark at the top right corner. And if you click on it, you know, you have some pop ups and then there are more links to your site, you can only have to kind of connect it in YouTube with your own site and you can only link to that. You can’t link for example to Amazon, that doesn’t work.

And, back in the day, there were things like annotations which were similar but they got rid of those because it didn’t work in mobile. And, overall, I think the clickthrough is limited. But at the same time, you know, if YouTube wants it and it’s part of an SEO ranking factor, I might as well put our best foot forward and optimize as much as we can.

Keywords Vs. Compelling

Andrew: You mentioned the title, of course, the name of the video. How important is it? I think that’s kind of a copywriting of someone who has blogged a lot and wrestled with this, how important for you is it to get that keyword phrased exactly in the title, versus writing a compelling title? Because sometimes you can get both, you can have the phrase perfectly in there as it’s searched for and come up with a title that’s very clickable and very interesting.

My experience, probably speaks to my lack of copywriting skills, that is a very difficult thing to do more often than that. You kind of have to pick either one way or the other, picking towards optimizing for SEO, or optimizing for kind of copywriting interesting aspect. Where do you fall on that spectrum and how important you think that is for SEO from YouTube videos?

Raphael: Frankly, I think YouTube is a little different than Google in the sense that the majority of your watch time will not come from search results but from promotions. So the title is somewhat important. And if you look at Google and how they started, right? They always had a deep…they looked at medical journals and said, “You know, in an academic world if you get cited more often in other people’s magazines and journals, then you become more valuable.” And, ultimately, they always wanted to create really great content for people.

So if you wanna create something that is timeless, you should always create good headlines, good titles for people because, eventually, that’s what Google wants. So, you know, I don’t wanna go back and optimize for SEO just so then two years later I have to change all of my titles because now something is wrong. I’m not gonna spam my stuff full of tags because it works now but it may not work one year down the road.

So people is always our focus. That, being said, because so many views come from the promotion of YouTube, the thumbnail is more important than the title.

Other Video Players

Andrew: Raphael, I know in your site, The Gentleman’s Gazette, you actually use the YouTube embed which I’m sure has the advantage of, A, being easier just you already have it on YouTube and, B, you’ve got, know, it helps with your view counts, I’m guessing, so it potentially helps there.

Have you ever been tempted to use something like let’s say Wistia or an independent hostage player for the reasons that you control it completely, you can, you know, YouTube has analytics as well but maybe more of a robust analytics, maybe some of the integrations like a turnstile where you can more easily build your email list that way. How do you think about using YouTube embedded on your own site versus some of the other third players?

Raphael: I think Wistia is a probably expensive, but if you use them, or a comparable service, I think it only makes sense if you, let’s say, have a landing page, or you use it as part of a funnel, you know, to upsell people and to capture that lead, or where you kind of connect it to a sequence where, you know, if they watch half the video then I send them this email, if they don’t, then I send them that one. I think for those kind of applications Wistia is great.

For our purposes we want to grow our YouTube channel and so we embed the YouTube video. Ironically, you know, people who like posts like to read, people like podcasts like to listen, and people who are on YouTube like to watch videos. So it’s actually surprising to see how few people watch a video from an embed.

Most of the time, the majority of the views come from YouTube, and because of that I don’t see additional value of having that Wistia thing in there because I want as much power and as many views as I can get in YouTube to grow the channel faster, because if I do so YouTube will promote me earlier and I can experience that hyper growth. You know, you can go from, let’s say, 300,000 views a month to 1 million views a month, to 15 or 20 million views a month within a range of just a year.

And that’s something I wanna work towards. I wanna become a really strong player whereas YouTube then takes our videos, and no matter what I publish, they will promote and spread the word about our brand.

YouTube in the Age of Ads

Andrew: How does advertising play into all of that? Obviously with the ads on YouTube, do you get a meaningful…or I believe YouTube shares a small portion of that with people on their channels. Does that make up of any kind of meaningful amount for you? Is that something you focus on? Or is there any way you could strategize to try to increase the percentage of the revenue advertisings that you get? How do you think about advertising with your channel?

Raphael: You know, early on we did some testing and it seemed like when we turned the ads on we would get more subscribers. I’m sure there are people who would challenge that notion. Sometimes if we do pure product videos that we embed on our product pages we kind of disable ads because we don’t want to detract from that. Right now, we make about, you know, $2000 per month from YouTube.

But, you know, we make a lot more selling our own products. So selling our own products is always the focus. That, being said, you know, if we attract 15, 20 million views a month we can make 25, 30, 40 grand a month. That’s money free and clear in your account. That’s not bad, you know. I’m not saying, “Oh, I don’t want that.” But if you can do that just think about how much you can generate in sales.

The Lightning Round!

Andrew: I love diving into the YouTube. One thing I wanna do kind of in wrapping up here is a quick lightning round with you that I do with most of my guests. So if you’re up for it, I’ll dive in, and feel free to just give me fast kinda one- or two-word in answers. If you had to identify the number one thing you’re trying to optimize your life for right now, what would it be?

Raphael: It is about replacing myself in the sense, you know, “How will the business survive if I’m not there, you know, if I have an accident or something?” So that’s the big thing I’m working on right now.

Andrew: Who is someone you strongly disagree with?

Raphael: I would say, especially right now, Donald Trump. You know, immigrants are awesome, obviously. I believe in climate change. I don’t think 50% of the tax cuts should go to the super rich and so forth.

Andrew: How much money is enough? What would be your number for money in the bank?

Raphael: You know, money for me was never a primary driver. I always wanted to create something. And, yes, I do want to make money but I wouldn’t wanna sell T-shirts or bamboo sunglasses that are made in China because I don’t care for that. So a number, I think for me, would be let’s say $50 million clear.

So, you know, if you sell a business, it would have to be valued probably $30 million because then at $50 million that’s 4% in bonds, you’ll make like $600,000 a year. I think that would be a good starting point. But even if someone would offer that money to me today, I probably wouldn’t take it because I want to build it into something bigger.

Andrew: What’s the worst investment you’ve made in the last 10 years?

Raphael: Probably law school.

Andrew: And what about the best investment, apart from your business, that you’ve made in the last 10 years?

Raphael: Well, I’d say, you know, the relationship with my wife. Now, that may not be so helpful for, you know, some of the listeners. But I think, in general, educating myself and relationships. I’m not a big real estate guy or a stock guy. Yes, I have my 401K, but investing in myself and the education I get, I think bears the best route.

Andrew: What was the first CD you ever owned?

Raphael: It was actually a gift from someone. It was something with Phil Collins or Genesis. I can’t recall.

Andrew: Well, I have a couple questions for you given your kinda specialty in the fashion space. For a man who’s not necessarily in the classic fashion, I’ll just put myself in this category, or really men’s fashion in general, what’s the biggest faux pas that they regularly make?

Raphael: There are actually lots of them. There’s not just one. I know one sounds so easy, but we actually have a free eBook with the 15 most common men’s style mistakes. So you can just sign up for it on our website.

Andrew: Great. And then finally, what’s the number one thing that a guy who’s not into fashion could add or upgrade in their wardrobe that would make the biggest difference in terms of classing them up? So you can only give them one thing, so maybe it’s a nice pair of shoes, nice belts, increasing the quality of their shirts, overcoat. What would that be?

Raphael: It’s funny that you ask that because, I mean, a lot of channels have this kind of one thing question, and I strongly disagree with the concept because I believe that you can’t just do one thing that changed it all for you in a meaningful way. Also, it’s not about providing a cooking recipe because the same thing doesn’t apply to the same person. It depends on where you live. If you live in Montana, my advice would be different to you than if you would live in New York.

So if I had to tell you one thing, it would be that you should do something that makes you a little uncomfortable in the sense that you wear something dressy and it seems like a little over the top for you, but over time you become comfortable in that your normal situation and then you’re ready to take the next step.

Andrew: Raphael, any last thoughts or a parting words for people thinking about getting into YouTube or building, spending a lot of time building a channel there?

Raphael: Yeah. YouTube may sound like it’s hard and you spend a lot of money on gear, we spend about 20 hours per video. At the same time, what I love about it is, that it keeps out all the amateurs. If you just think about how many people in your niche have a Facebook page or an Instagram account, maybe 100,000 or 10,000, how many people in your niche run a podcast? Maybe 100.

How many people in your niche have a good consistent YouTube channel? It’s maybe five. So if you’re one of those five and you can grow, and keep in mind that YouTube is the second largest search engine in the world, you can just be early on in something that’s growing and be very beneficial for your business in the long run.

Andrew: Raphael, this has been a lot of fun diving in and getting to hear your experience. Thank you for being, like we talked, you joined, you know, somewhat recently in the forums and it’s been wonderful having you in, seeing how engaged and how much value you’ve added there. So thanks for thanks for being a killer part of our community. And also thanks for coming on to talk shop, share your story and talk YouTube. I really appreciate it.

Raphael: Thanks for having me and putting together at the eCommerceFuel forum. It’s great to have outlets like that with like-minded people.

Andrew: That’s gonna do it for this week’s episode. If you enjoyed what you heard and are interested, you can plug into a dynamic community the experience store owners, check us out at ecommercefuel.com. eCommerceFuel is the private vetted community for e-commerce entrepreneurs. And what makes us different is that we really heavily vet everyone that is a member to make sure that they’re a great fit, that they can add value to a broader community.

Everyone that joins has to be doing at least a $250 million in sales by their store. And our average member, there’s over seven figures in sales annually.

So if you’d like to learn more, if that sounds interesting, you can learn more and apply for a membership at ecommercefuel.com. And also, I have to thank our two sponsors to make the show possible. Liquid Web, if you are on WooCommerce or you’re thinking about getting onto WooCommerce, Liquid Web is who you should have to host your store, particularly with their managed WooCommerce hosting.

It’s highly elastic and scalable, it’s got built-in tools, performance to test your store so you can be confident it’s gonna work well. And it’s built from the ground up for WooCommerce. You can learn more about their offering at ecommercefuel.com/liquidweb.

And, finally, Klaviyo. For email marketing, they make email segmentation easy and powerful. They integrate with just about every card out there and help you build incredibly automated powerful segments that make you money on autopilot. You can check them out and get started for free at klaviyo.com.

Thanks you so much for listening and looking forward to seeing you again next Friday.

Want to connect with and learn from other proven ecommerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight-knit vetted group for store owners with at least a $250 million in annual sales. You can learn more and apply for membership at ecommercefuel.com. Thanks so much for listening. And I’m looking forward to seeing you again next time.

Six months ago, Noah Kagan and I sat down with Dave McGeady to run an experiment. We wanted to see if we could identify big levers that could make his business, Wyldsson.com, significantly more successful in a short period of time. In that episode we outlined 23 things that would take less than 30 days [...]

Six months ago, Noah Kagan and I sat down with Dave McGeady to run an experiment.

We wanted to see if we could identify big levers that could make his business, Wyldsson.com, significantly more successful in a short period of time. In that episode we outlined 23 things that would take less than 30 days and less than $1,000 that we hoped could offer outsized results.

Today we’re circling back with Dave to see how the implementation went and most exciting- what the results were.

Andrew: Welcome to the eCommerceFuel Podcast, the show dedicated to help high six- and seven-figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow ecommerce entrepreneur Andrew Youderian.

Hey, you guys, Andrew here and welcome to the eCommerceFuel podcast and thanks so much for tuning into the show. And today we’re doing to follow up on an episode that I did with Noah Kagan from appsumo.com and Dave McGeady from wyldsson.com in the spring of 2017 where we tried a little experiment, and the experiment was this. How much could we really impact the business by making two to three changes that you can accomplish in under 30 days for less than $1,000?

The idea was trying to identify the highest leverage points in the business, and so that’s what we talked about back in that first episode. And today we’re following up on that episode and covering three things. If you stick around here’s what you’ll learn. One, how the changes went, or how the implementation went for those three changes that Noah and I recommended, the conversion rate impact it had on Dave’s business, and some musings and thoughts and reflections on what we would’ve done differently in terms of the changes, the experiment, and just kind of the whole process.

So always interesting it was fun to kind of put yourself out there, and we had no idea obviously how this was going to go and so those are sometimes the most exciting episodes for better or for worse. So excited to share with you results and talk you through the process. I hope you enjoy.

Before we jump in I want to thank the two sponsors that help make the show possible. First, a big thank you to the team at Liquid Web who I used to host all of my sites and stores at eCommerceFuel.com, the private directories that we have and the private community, and the Woocommerce store that I run. And who now is offering a completely-managed solution for Woocommerce. So if you’re on Woocommerce and you’re looking for a rock-solid platform that is built from the ground up to make your store shine, look no further.

Two big reasons why you’d want, the first one is elasticity. They manage traffic searches for you painlessly. So if you get on Oprah, you get on the front cover of Wall Street Journal unexpectedly, you’re going to stay in line when it’s most important even if you get hit with a barrage of traffic. And secondly, they have a whole suite of tools that help you stress test your store, really designed for store owners who want to put their store through the ringer, and they want to make sure everything is working perfectly. They’ve got a staging environment that lets you run simulations on your store as well as test out UX changes and enhancements. So to know more about them check them out at ecommercefuel.com/liquidweb.

And, secondly, I want to say a big thank to Klaviyo who makes email automation easy and powerful. Of course, Klaviyo, their really killer feature is their segmentation and the data that they’re pulling, allowing you to create really customized segments to target via email. But I want to talk about quickly today their Facebook integration which maybe you aren’t familiar with. And it can do some really cool things. It’ll sync your Klaviyo and your Facebook accounts.

So you can for example, if you have a segment in Klaviyo of all the people who have abandoned your shopping cart, you can take that same segment of people, create an audience in Facebook, and target those people on Facebook to try to get them to come back and complete. Same thing, maybe you have a segment in Klaviyo where somebody purchased lederhosen but not your 150-ounce Bernstein. Well, you can, same thing sync it over to Facebook and target that audience on Facebook based on the data you have in Klaviyo which is pretty cool. So if you’re not using them check them out, you can get started with a free trial at Klaviyo.com.

All right, let’s go ahead and get into today’s discussion.

I’m back on the air with Dave and Noah. Gentlemen, welcome back.

Dave: Thanks, Andrew.

Noah: I missed you, Andrew.

Andrew: I missed you too, Noah, it’s been too long. So excited to dive in and see if Noah’s and my advice is worth anything at all. If it’s worth $5 or maybe $10 we’ll see at the high level, and see how things worked out with the changes that Dave made. And if you remember, we’ll do a little bit of flash back, but earlier this spring Noah and Dave and I got together to talk about his website, and talk about changes he should make to really try to improve his business. Let’s take a listen.

So I think it will make easier if people have wrapped their minds around what you’re offering, what they want to buy, so.

Dave: Okay, interesting, yeah.

Andrew: Yeah, so two big things, I think it’s fair to say. Dave, how do you feel about the next 30 days, getting subscriptions turned on by default on the product page, and then really working on simplifying that homepage? Noah, would you say those are kind of maybe the two biggest?

Noah: I love that.

Andrew: And I think, yeah, keep it simple man. And then collect email, turn on Sumo and just collect. You have like you’re only getting 5% of people buying, that means 95% are not. Everyone is always like, “Ooh, 5% is so good.” I’m like, “Yeah, that means that everyone else is just leaving.” So, and we’re happy about it. It’s like, “Yeah I make money one out of 95 times.” Anyway, I think those three things are great; simplify homepage, subscription on default, collect some emails, you don’t have to send the email just start collecting them so when you are ready.

So Dave the three things that Noah and I distilled in terms of what we were hoping you could take action in terms of the highest leverage points in your business was three things: simplifying your homepage, collecting email addresses with a pop-up, and turning on subscriptions for your product to try to get more recurring revenue. And so with that, maybe we can dive into those one by one?

Let’s start with the homepage simplification. So what did you change? I got a list, maybe I can go through these and you can kind of talk about what you did and what changes you made. So, for the homepage simplification, a new headline to really incorporate kind of the idea of a speedy food plus deliciousness. Was that something that you worked in?

Dave: Yeah, we changed the headline, we changed it to “Better Food Making Healthy Taste Delicious.” You know, at the time I thought it was good, really good. Yeah, I did like it at the time. I’m not sure if I like it anymore. But we can talk a bit about that a little deeper if you want.

Andrew: Cool. So you did make that change on the headline. And then I noticed that the homepage looked a lot better in terms of moving all the products to the homepage from cover, buried shot page, your pictures on the clickable kind of icons, and the homepage are really showing off the food versus the packaging. So that looked great. The only thing I wondered is, we had talked about putting the Kickstarter video, because you had such a good Kickstarter video on your homepage and your About Us page, and I don’t think it made it on there. Was that something you thought about doing? Or why didn’t that make it on?

Dave: Yeah, we just kind of gave up in terms of sort of cost and effort from listening to some other people’s wallet. I think the kind of amount of people who watched the video was pretty low as well, so we thought, “Well, we’ll just use a picture for the moment.” We’ve kind of never got around to actually doing that video.

Andrew: Yeah, Noah I’ll let you take that. Email pop-ups and collecting emails because that was a big one of yours.

Dave: Well, just, all this stuff in the business as well. We had a certain amount of time to give to this project. We had to draw a line somewhere, so we said, “Okay, let’s just leave the photo out there, we’ll come back to it.” And it’s one of the things, so we haven’t come back to it yet I suppose.

Andrew: Yeah, it’s one of the things I’ve noticed even in our business where it’s like, “What’s our most important goal?” And then I looked at all the different things we’re doing, and every business, Andrew’s business and mine, and everyone listening. And then it’s like, “What are the actual major things that are going to move our business?” And so I do wonder if like you, how your prioritization was around that, of what things are probably going to move your business the most. And do you think you did those over the past 30, 60 days?

Dave: Yeah, yeah. Just the video, I mean, we’ve had videos before. We have videos on the side and it’s surprising how few views they have. We got to justify stuff and I just didn’t think it was something that we could prioritize at the time. But there’s a bunch of other changes that we made which I think were great. So, for example, I think both you guys had a really good suggestion, and that was, previously we’d just shown pictures of the packaging of our food, which was a shame because we’ve got some great photography shots of our foods. And we’ve replaced the shots of the packaging with shots of the actual of food in use, which kind of makes it look a bit more appetizing.

Andrew: What about the go-to number two was collecting emails with a pop-up? It was Noah’s big suggestion. How did that go?

Dave: Yeah, we tried it for a little while. Yeah, it didn’t really work so well. We didn’t really collect many email addresses. I just couldn’t get my head around giving an offer, like a discount code, to existing customers. Instead what I tried to do is figure out a way to offer the discount code just to new customers. And so in the end I kind of gave up on that one.

Noah: One of the things I was talking with Andrew about is that we’ve gone AppSumo and it’s only from our email list, and it’s stable business. But two things I notice a lot of people say is, one, “I don’t have time to grow my email list,” or, “I don’t want to grow it.” And it’s because you probably haven’t seen results from it. And then the second part is that, “Hey, I don’t want to discount.” And so the two things that I’d be curious about is, when’s the last time that you have emailed your subscribers, or your past customers?

Dave: Today. We have a very active email list. We use Intercom.

Noah: And so how often are you emailing your customers list?

Dave: It depends. Every week. But if they’ve purchased recently a little bit less. So if they are kind of elapsed customers, we might email them a little bit more, it just depends.

Noah: I’m actually kind of surprised. So you’re saying that email list is very effective and it’s very useful for your business, but to put more things on to help collect more emails is not something you’ve been interested in? Or you haven’t been? I’m curious why you haven’t prioritized that.

Dave: Yeah, I mean we did. We had the pop-up for a little while. It didn’t collect an awful lot of emails to be honest. You know, we collected some but not all that many. Couldn’t find a good way of doing that and that sort of got shelved in the end. But maybe we should just have the pop-up back again.

Andrew: It’s also relative, like what’s not a lot? I guess I’m curious like, and you don’t have to do the discount. But if you’re getting, , I don’t know how many visitors like in a day you guys are getting now or a month?

Dave: I’m not sure off the top of my head. I don’t know.

Noah: Okay. Well, it should be generating between around 1% to 5% especially on an ecommerce business to email subscribers, which sounds like if you’re emailing them a weekly thing, which I really like, or at least monthly you’re communicating, should definitely make a difference in your business.

Andrew: Get a handle up your day. Looks like you’re getting about 8,000 visitors per month. So, looking at that, you’ve got probably about 250 plus per day. So, times by 5% and what you’re looking at 10-ish emails per day, between five and 10, was that about what you were getting?

Dave: No, I don’t think we were getting that many actually. Yeah, I think maybe it was a case of I was trying to find something kind of a perfect solution. In the end we kind of went with nothing. In the end we just sort of gave up on that, but, yeah, maybe we need to have another look at it.

Andrew: Yeah, I want to move on, make sure we get through everything, but maybe one parting shot. And, Noah, if you’ve got one tip. I think emails can be so hugely effective, and I think maybe one thing to try going forward, is it’s only that it takes a while to get that offer right for that opt-in. I was chatting with Andy Hayes, he’s done incredibly well with blogging. His episodes have started to come out. I’ll link up to that in the show notes.

One thing that he mentioned that’s worked really well is he doesn’t do discounts for a lot of the reasons you would expect. And what ‘s worked really well with him over, as he’s seen as kind of emails evolved, is just simpler offers. They have something on their opt-ins that say, “Do you want more tranquility and peace in your life? Sign-up for our newsletter.” And that probably isn’t going to work for you, but maybe it’s not a guide to refined sugars, maybe it’s something more like, “Hey, here’s the top three super easy fast recipes to eat healthy on the go.” Or maybe it’s, I don’t know what it is. But I think if you can test, everyone, there’s something that it’ll line-up and if you can test, it might take a little while but I think it’s worth doing it to unlock that email, because it’s a pretty valuable channel.

Dave: Yeah, I think the problem that we got to was get them over the line and get them to purchase, differentiate between existing customers. We don’t want to send them offers because it’s just not something we want to get in to. We just couldn’t find a good way of doing that. I’m sure there’s ways of doing it, but that’s kind of the road we were going in and in the end just got frustrated and just kind of gave up. So, yeah, that’s where we got to, but maybe we’ll have another crack at that.

Andrew: That’s nice. Any parting thoughts on email before we got into the last section here?

Noah: I think the overall thought is just committing some amount of time. I don’t know about you, Andrew, but I have… here are the things that I think are going to make a hugest difference in my business, and I avoid a lot of it. I’m like, “I don’t want to do it.” And then when I actually just like sit down and commit and say, “I’m going to do it in one hour, turn of my phone and get it done.” I’m like, “Oh, it wasn’t so bad.”

And I think one thing is limit your time constraint, and then the second thing is, “How can you work on activities like an email, or other things where it’s not a one-off?” Because once you get that pop-up going, or email collection, in whatever way possible, maybe it’s a smart bar at the top, or maybe it’s underneath the Buy band, wherever you figure out is good for you, you don’t have to do it anymore. And so try to figure out more ways to do that in your business versus, “Oh, I have to go set this up and kind of have to keep revisiting it.”

Andrew: Awesome. And so the final thing that we had chatted about, Dave, was subscription. So, turning on those subscriptions by default on your product page, and maybe on a more meta level, but trying to get a sense of, “What’s your customer lifetime value? How long do your average subscribing customers remain customers?” So how did things go in terms of turning that subscription on by default for people when they added products to their page, or at least having being an option on the product page?

Dave: I haven’t really done anything. We made a bunch of changes, stuff that I think is pretty good. But the subscription one was just, it’s just something that I really just could not do. I’ll explain why. We have to give a refund, a full refund, so we might’ve shift 50 stuff to them and it’s a few products, we can’t take it back and sell it again. That’s a huge cost. And customers are really angry as well because they think they’re being tricked. They think that we have subscribed them to something. And if we have subscribed by default, I just could not imagine how awful that would be. For that reason alone, I just couldn’t do that.

Andrew: Yeah, and, Dave, I’m not trying to harp on all that negative. I was just trying to kind of like focus on the two or three big things, because Noah and I are trying to find that the biggest leverage points in the business.

Dave: I think just from reflecting on myself, I think that a kind of subscription by default is a great way to do it because you can entice people into that model by doing a deeper discount, and I know a lot of people do that. With a physical product, particularly food, once you sent it out the door, we are actually obliged within the EU to give a refund.

Andrew: You mentioned that there were a couple of other things, other good changes that you made that we had talked about on the show. What are those? I’d love to kind of dive into on some of those.

Dave: Yeah. Well, I think the biggest change was using a lot more of the great photography that we have. And I think it works really well, so I think showing these food products really changes the whole vibe of the site, so I think that’s brilliant. Another suggestion that was made was that we simplify our menu. So I think that’s made it a lot easier for people to see what is it we do, and to find their way around. We also added upsells to the cart page, so when someone is checking out they can see very quickly some of our most kind of popular products. Intuitively, I think it’s a good idea. I think we could probably do a little bit more of it but definitely a step in the right direction.

Andrew: So let’s chat about kind of results, if it’s actually made any meaningful change in your business. So, so when did you make a majority of the changes by, Dave?

Dave: Yeah, so we actually made the changes in May, during the month of May, so kind of step by step we made most in them.

Andrew: Got it, yeah. And were there any other big changes that you made between May when you implemented those changes and October like anything? You had mentioned a price increase, it sounds like that was pretty incremental. But any other migrating shopping cards, or any other major events that could have impacted this?

Dave: No, no.

Andrew: So, maybe we could do at a higher level, a yes-no, if you think this was successful in improving the business, and then we can dive into the numbers. What do you think, Dave? Do you think it helped the business?

Dave: Yeah, I do. Yeah, I do. I think…

Noah: And don’t be afraid to throw us under the bus, we can totally take it if didn’t.

Dave: Yeah, no, I do. I mean, intuitively I think that what we implemented really good suggestions, really good ideas, it was good to have external viewpoints, stuff that we probably should’ve done long time ago, but we just kind of couldn’t see anymore because we’re snow blind. Arguably, we should’ve given some other stuff a go as well. I think what we did implement was good.

Andrew: Yeah, and it’s interesting doing a little, just a little more nuance on the data. This is something that it was kind of a shortcoming on my fault. I should’ve done a better job when we set this whole thing up, saying like, “Hey, here is how we’re going to determine success.” Because I don’t know about you guys, Dave and Noah, there’s a lot of times when I’ll do stuff for my business and I’ll just be kind of on alert, I’ll be like, “Oh, I’m going to do this. I’m going to redefine, I’m going to rewrite the sales page, or I want to try this initiative.” And I don’t, from the get go, set up a, “Hey, what’s winning and what’s losing?” And like, “How am I going to know if I’m successful? Am I going to roll it back if I don’t meet these criteria?” And that’s something I don’t know if you guys are better at that than I am, but I’m traditionally pretty bad about that, so on my side I should’ve done a better job of setting up like the rules of the game and how we were going to measure this for you, Dave.

Anyway, quick numbers. So like May I was looking at your conversion rate because I feel that traffic is a really viable conversion rate, can tend to be a very still and perfect. But you knew a better proxy for how effective it is per visitor. May conversion for you was 3.02%, in October it was 5.29% which is a nice little jump up. Looking at your data, like January you were 5%, and then March you were dropped a little to 4.8%, and then in April, stuff fell off a cliff like to 2.91%, conversion rate down, getting close to 45%. And even digging into the traffic mix, looking at like early in the year versus April, the mix stayed pretty close to the same. Like organic was still your number one, direct was right behind it. The traffic mix didn’t change a lot but the conversion rate across all of those channels fell by close to 50%.

And so, you said there’s nothing major that happened. So it’s interesting, I think another big lesson maybe we can take away from this – and, Noah, I’ll stop talking here for a second I would love to hear your thoughts – but it’s really hard if you’re not AB split testing everything. They’re so many variables in the business, so many inputs, so many different things coming in to try to isolate what it is that makes the difference. You can definitely do it, but I think there’s an interesting debate to be had too between those like, “Do you just do what you think is best and move quickly? Or do you try to AB split test everything?”

Noah: One of my thoughts with Andrew, I think a lot of business this is happening, including our own, so it’s like, “Hey, revenue is down,” and you’re like, “Okay, it’s down.” And it’s kind like flying an airplane and things aren’t going well, and you just don’t have the right odometers. I think too many businesses actually track too many metrics, but I think for Andrew, if business is not in a growth curve, or it’s not going where he wants to go, like, “What are the key indicators that will show what exactly is off so that you can actually correct it?” So I think that’s part one, like, “What are the key things?” So, like, “Did organic traffic drop? Did paid traffic drop? Did referrals? Did you get not features like you normally do?” And figuring out what are the things that you need to be happening to make sure you held the right altitude.

And the second thing, it is interesting because, on one hand, Andrew, I always recommend just move really fast and then see how things go. But, on the other hand, definitely we’ve made a lot of mistakes where we’ve made a change because we think it’s right and subsequently, like six months later, we’re like, “Wow, revenue’s been down a long time. What did we change?” And it’s because we like for Sumo.com, for instance, we made something a paid thing that used to be free. And it seemed kind of a good thing the first few weeks, but then ultimately it stalled our growth down but we didn’t see that in the big picture. And so I think you have to be kind of aware if you’re making changes that have a bigger impact than just changing some of the text on a page.

Andrew: Yeah, I mean you’ve got a much larger organization, Noah. Do you have some kind of framework? Like when people do big changes, do you lean more towards – it sounds like you do – kind of, “Let’s see how it works and then refer if you have to”? Or do you kind of have…I guess what I’m asking is, are you better than I am at having a framework for making changes, determining if they’re successful and rolling them back, otherwise you do kind of wing it, kind of like I do?

Noah: I do want to highlight that most of our changes don’t work. And we’ve tracked this over the years and it’s like 80% plus of our tests and optimization stuff doesn’t actually work. And so I think that’s a good message of you just have to keep trying things over a long period of time, that’s number one. Number two, what we do is that we document everything. So what happens, I notice as businesses go on, is that you lose institutional knowledge, and you lose experience, because it’s just like you start over again to some extent. So in GitHub, we track actually all of our test and the outcome, so even as new people join there’s some knowledge around those things as we’ve gone on with our business.

Andrew: Dave, do you have any thoughts on like what causes so much variance in your business?

Dave: I don’t, I just don’t know. I mean we do have some seasonality for sure. I think there was something that kind of affected us in April and the conversion rate but I’m not sure what it was. It’s funny, May-June we’re making these changes, and I guess we kind of felt, “Well, yeah, we’ve made some changes. It’s always going to get a bit worse before it gets better.” And probably put down any of the fall and conversion rate to the kind of work we do on the site. But I think there might have been other causes as well.

Andrew: One thing that might be worth thinking about, just kind of came to me because I’m looking at the numbers, is your highest converting channel by far is referral traffic. So I’m pretty sure that’s like people that have blogged about you, or mentioned you organically, and people clicking through a link to your site. And it’s anywhere from 10% to 13% and only generates about 7% of your traffic.

So going forward, I mean, probably worth diving into there, looking at who’s referring you and which of those – and it’s probably coming from, I’d say, if I’d guessed, two or three top sources – seeing what kind of audiences are coming from those top referrals that are converting at just astronomical rates and doubling or tripling down on that. Because if you’re going to move… if I was going to try to move the business, looking at that, it seems like it would be one of the best leverages you’d have.

Dave: Yeah, interesting. Okay. Yeah, cool.

Andrew: Noah, did you have something else you were going to say?

Noah: I think one thing is that there are best practices so you can go look at some of these ecommerce sites that have done a lot of the things, or blog post about it, and you can copy it. But you also just need to be careful to check to see, like, one is this, “How you want to be?” And, two, “How do the numbers actually hold up for yourself?” We’ve had things in our email templates, we added a bunch of upsells in the email so it had a bunch more products. And at first, revenue was great but then over time we actually noticed our open rates went down, because we were like, “Oh, I’m just getting sold a lot on these emails.” So just be aware of what you’re looking at as you’re making a lot of these changes. I think it sounds like Dave that would have helped you.

Andrew: Dave, going through this process and going through running your company, if I’m starting an ecommerce business, or other people are running it out, running their own out there, what kind of things, based on this experience and just in general, recommendations do you have?

Dave: Yeah, I guess it’s pretty useful to get people if you don’t know your business or your products to look at your size and to ask you questions that you don’t ask yourself anymore. I think that was probably the most useful part of this exercise.

Andrew: One other thought with that, it’s something I’ve been thinking a lot lately and I do it in different parts of my life, and I’m not perfect at it but definitely working on it. It’s like, do you have anyone that is like a coach, or anyone for accountability? To say like, “We checked in with you I think now it’s like three months later,” but is there someone that you have, that you can be like, “Hey, man, here are thing I say I’m going to do,” and they kind of work with you to make sure you get them done?

Dave: I don’t know. No.

Noah: I have like a health coach and I talk with him every week about things I’m going to eat. And I also have a business guy, he’s actually the same person where I say, “Here is what I’m going to get done this week,” and at the end of the week he holds me accountable. And if I don’t do it he just talks to me about it. He doesn’t punish me, it’s just more like, “What happened?” And I know because I have that it works for me to get more things done, or at least the things I say I’m going to get done.

Andrew: Yeah, for me too. It’s really hard because, I mean, hitting all your goals, it’s difficult to get all the things you know you need to get done done. That’s like the hardest part of being an entrepreneur. And I’ve got a group of like five other guys I meet with every couple of weeks here in Boston, and we sit down, and have coffee, and talk, and part of that is goal planning. And for me, this last quarter, I didn’t hit all my goals, but there was one I remember specifically I got two out of the three that I had committed to, and one of them there was no way I would have got it done if I didn’t know that those guys were…there’s no way I could go in to them and say, “I only got zero out of three, or one out of three.” It meaningfully made me do some painful things to get all that done. Otherwise, there’s a lot, most of the stuff that I have on my plate, I probably wouldn’t get done. So that’s an awesome point, Noah.

Noah: What were some of your goals? Or is that for another episode?

Andrew: For that little quarter, there were three things. One was getting the Mastermind, have an internal, what I’m calling deep impact Masterminds, for our private community setup and launched, and that one I hit. My second goal was to launch an ecommerce job board by the end of the quarter, which I did not do. I just failed based on kind of, Dave, what you were talking about. Like just other stuff comes up and life gets in the way and you prioritize things and I didn’t do it. Third goal was to take each of my daughters on an overnight camping trip in our van, just one-on-one, and I did get that. So those were the goals.

Well yeah, maybe kind of in a wrapping up, what do you guys think? Noah, I know you love life lessons. If you haven’t been listening to Noah’s podcast, it’s called “Noah Kagan Presents.” It’s really good. I had it in my ear the last couple of days and really good episodes. Enjoyed the one with Tynan, that one was really good. I enjoyed you, one with the guy who retired at 40. I’ll link up to both of those episodes in the show notes. Check it out, it’s a great, great podcast.

But you talk a lot about like life lessons in there, so, I don’t know, maybe in kind of wrapping things up, all three of us can maybe conclude with, in a nut, to know a life lesson or big takeaway from this whole experience. I know you kind of already did, Dave, but maybe we can all do one in ending here. So, Noah, why don’t you go first, Dave, and then I’ll wrap it up with mine.

Noah: Oh, no pressure. Thanks, Andrew. Come up with something, life lesson changing. So I’ve got one because it’s something that we’ve been doing and working on in our business trying to improve. And basically what we’ve been doing is called a “three-minute rule” and I think this kind of applies to Dave and myself, and I think anyone who’s listening. Basically, the three-minute rule is anything you can do in three minutes just do it now. And I think there’s a real strong life lesson, maybe it’s five minutes, or maybe you’re better than me, you can do 20 minutes or 60 minutes. But I think a lot of us, for me I know I have these stuff on my list I’m like, “Oh, I’ll get to it, I’ll get to it,” and when I finally, if it’s like fast enough or it’s just one thing I’m like, “Let’s go do it.” You could actually get it done. So anything that’s been on your list for a little while, for someone’s who’s listening, just go do it right now.

Dave: Yeah, I guess it’s my turn. I have a life lesson I can share here. A life lesson should come from the place of wisdom and success. I don’t feel as if I have something that I can bring you that’s come from a place of wisdom or success.

Andrew: Dave, I can softball, or I think in soccer I can give you the ball and you can score a goal. Is that cool if I just…?

Dave: Yeah, do, yeah, yeah.

Andrew: So it sounds like it was a little bit of a rough summer in terms of your business, so it wasn’t as explosive or life changing as maybe you wanted it to be, but what kept you motivated? Like how’d you keep going? I’d love to know that, maybe that’s a life lesson for me and for everyone listening.

Dave: Yeah, I guess we did a Kickstarter campaign that failed very badly. So that was kind of our big project for the summer and it didn’t work out. Our long-term goal is what we’ve been focused on for the entire year, and that is we’re focused on making a protein recovery drink. I think we’ve, to a certain extent, kind of taken our eye off the ball. We’ve done a little bit of promotion, really nothing and we kind of paying the price to a certain extent for that at the moment. So I’m very keen on looking at the longer-term goal, looking at the big picture, and for me that’s what I think is really important for this business.

Noah: I think that’s a great lesson. I think I’ll pick it up for myself.

Andrew: Yeah, agreed. And, Dave, I just want to commend you two for coming on, being willing to do this. If I was in your shoes I would be scared to come on in front of people on a podcast and to give people a look inside my business, commit to making some changes, and then coming backing and being able to, like say whether they worked or not. Like that’s scary stuff, and so I appreciate, and I know, Noah, appreciates you coming over and doing it. It’s something not everyone would do. So I think it’s cool you were brave enough to put yourself out there in the public way, man, so thank you.

Dave: Yeah, thanks guys for helping out. I appreciate your help. I think we did some great stuff actually.

Andrew: Yeah, and my kind of my life lesson just kind of wrapping things up here is, I think it’s just important to know that this stuff is it’s easy when you’re reading a blogpost conversion Excel, and not a Higgins’ PEP. PEP is amazing. He has incredible content there, any conversion blog for that matter. That you can make changes, you can see if they work, and you iterate your business forward and it’s up into the right, and it’s very clear. And that’s just that’s not the case like in terms of how businesses grow, or even in terms of making changes in your business, or even analyzing the results of what happens. Like this stuff is messy. I mean, it would’ve been great if we could come on and, Dave, you were like, “Hey, I did all three things, bam, bam, bam,” but like all three things, like the subscription thing had some nuances that were difficult to implement, and if we could say like, “Hey, your conversion went up 60%,” so we could attribute that all to Noah’s brilliance, and a tiny bit of my help.

But that’s not how life works, and so I think it’s important to be able to establish, do the best you can. Think about if you have a seasonal business, try to control for that, try to set rigid, or at least real clear measurements about, “This is what we’re going to measure. This is where we’re going to determine success.” But, at the end of the day, realize like a lot of this stuff is not an exact science. There’s a lot of squishiness and to keep moving forward despite that, I think, is an important thing to keep in mind.

That’s all I got, gentlemen. This has been a lot of fun. Noah, thank you for coming on. Dave, thank you for doing this. And, again, if you haven’t checked out Dave’s products, I know you don’t ship to the US, but if you’re in Europe, they’re awesome, they’re incredible. I actually, Dave, I want to chat with you about getting more of that Overnight Oats, because those things are really good in the morning for breakfast. So check out his site wyldsson.com. We’ll link up to the show notes for that. And again, Mr. Noah Kagan, amazing podcast, good guy. Make sure you listen to him, if you’re not.

Dave: Yeah, sorry just before you finish up. Yeah, we’re looking to do something on Amazon in the US. So if anyone is listening, and they’re interested in our products, have a look at our website, shoot me an email, let us know, and we will let you know when we launch on Amazon in the US.

Andrew: Perfect. Great. And what’s the best way for them to get a hold of you?

Dave: Wyldsson.com. I’ll get that and I’ll add you to a little email list, and we’ll let you know when we go live.

Andrew: Perfect. Well, Dave, Noah, this has been fun, guys. Thanks so much.

Dave: Thanks, guys. Thanks, Andrew. Thanks, Noah.

Andrew: That’s going to do it for this week’s episode but if you enjoyed what you heard, check us out in ecommercefuel.com where you’ll find the private-vetted community for online store owners. And what makes us different from other online communities or forums is that we heavily vet everyone who joins, to make sure that they have meaningful experience to contribute to the broader conversation. Everyone who we accept has to be doing at least a quarter of a million dollars in annual sales on their store. And our average member does seven figures plus in sales via their businesses. And so if that sounds interesting to you, if you want to get connected with a group of experienced store owners online, check us out at ecommercefuel.com where you can learn more about membership as well as apply.

And I have to, again, thank our sponsors who help make this show possible. Klaviyo who makes email segmentation easy and powerful. The cool thing about Klaviyo is they pull in all your entire catalogue of customer and sales history to help you build out incredibly powerful automated segments that make you money on autopilot. If you’re not using them, check them out and try them out for free at Klaviyo.com.

And, finally, Liquid Web, if you’re on Woocommerce, if you’re thinking about getting on WooCommerce, Liquid Web is the absolute best hosting platform for three reasons. One, it’s built from the ground up for Woocommerce and optimized by some of the best industry professionals in the Woocommerce who work in the space that really know this stuff. And it’s highly elastic and scalable as well as it comes with a whole suite of tools and performance tests to optimize your store. You can check them out and learn more about their hosted Woocommerce offering at ecommercefuel.com/liquidweb.

Thanks so much for listening. Really appreciate tuning in and looking forward to talking to you again next Friday.

Want to connect with and learn from other proven ecommerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight knit, vetted group for store owners with at least a quarter million dollars in annual sales. You can learn more and apply for membership at eCommerceFuel.com.

Thanks so much for listening and I’m looking forward to seeing you again next time.

How many cutting ­edge eCommerce marketing gurus do you know talking about print mail? Yeah, me neither. But it turns out those old-fashioned catalogs and flyers (printed on actual PAPER, if you remember what that is) can be incredibly powerful. I sat down to talk with McGregor Button of LinkSoul about how his company generates [...]

Andrew: Welcome to the eCommerceFuel Podcast, the show dedicated to helping high six and seven-figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow eCommerce entrepreneur, Andrew Youderian.

Hey, guys. It’s Andrew here, and welcome to the eCommerceFuel Podcast. Thanks so much for tuning in today. And I’ve got an old-school, what seems like an old-school technique to discuss that actually has a lot more power than you might you might imagine and that is direct mailing. Yes, I’m talking about paper, mailboxes, super old-school stuff, and these I realize is an e-commerce podcast.

But my guest today has been doing some really cool things with the direct mailing and catalog world. And his name is McGregor Button. He’s the VP of marketing over at Linksoul, which is an apparel brand out of California. And he casually mentioned one day that they generate, you know, something like 40% of their revenue via direct mailing and immediately my little antenna went up and was thinking, I have never heard of anyone in our industry say that.

So I wanted to get him on the show and talk about how he does that. And we talk about a lot of things. We talk about the level of ROI he sees with direct mailing relative to other channels like e-mail, PPC, retargeting, things like that. Talk about how much it costs to print a catalog like one of those gorgeous, you know, 30 or 40-page catalogs, how much it costs to print and mail it. I thought it would have been $5, $6, $7 maybe I’m naive.

But I thought it would have been really expensive, maybe I’m just getting fleeced every time I go to Kinkos and make a color copy that’s probably more likely, way less than that and we talk about, you know, how really affordable can be to put one of those out.

He covers what I think is a super creepy, but also amazingly powerful abandoned cart sequence that you can use with postcards without even knowing your customer’s address, which is really cool. McGregor shares a lot of really interesting things and in a realm and a marketing tactic that we as e-commerce store owners really do not think about very much, which is perhaps, maybe why it’s so effective. So I’ll leave the teaser at that, we’ll go ahead and dive into this day’s episode with McGregor on direct mail marketing.

Quickly before we jump into today’s discussion I wanna thank our two sponsors for the show. Something new I’m doing for 2018, I have a couple of companies with great products, great teams that I feel comfortable to put my name behind that are helping bring you the show this year and the first one is Klaviyo. If you’re in the space and you listen to the podcast very often you’ve likely heard of these guys, but if not, they help you make more money with your store through their superpower, which is segmentation.

So they connect with pretty much any shopping cart out there and pull in your product catalog, your order history, your customer’s order history, and let you create really cool flows in the background that just run automatically. For example, you can create flows that go out to your best customers, you know, people who order a certain over a certain threshold every month.

If people like, we had one where if people ordered a certain package, product package it would send them out an installation guide automatically, and then follow-up with, “Hey, do you want an extra part for that?” It’s gonna be, you know, a bummer if that breaks and you’re out for willing, and you don’t have an antenna, and it’s amazingly powerful system. So if you’re not using them you’re probably leaving money on the table and you can get started with a free account at Klaviyo.com.

And secondly, I wanna thank the team over at Liquid Web, who is well-known in the hosting space for their, you know, top-tier hosting and support and just came out this year with their managed hosting solution for WooCommerce. So if you’re on WooCommerce, a couple of reasons you might wanna consider it.

One it’s built from the ground up to help Woo run faster to help with your upgrades, to help with testing extensions, and make sure everything is running just perfectly. And the second thing is that it’s highly-scalable. So, let’s say you sell just for the sake of the argument a lederhosen because who doesn’t love lederhosen and you got featured at Germany’s top lederhosen review site.

What with most Woo hosts, you’re gonna go down, they can’t handle the traffic unless you’re crazy geeky about load balancers and all sorts of technical stuff. Liquid Web is gonna keep you up, gonna scale up with that surge of traffic when you most need to be online. So if you’re interested in learning more about their solution and want a rock solid platform for your WooCommerce store, check them out at ecommercefuel.com/liquidweb.

Background Story: Linksoul

All right. So let’s go ahead and get into today’s discussion. McGregor, one thing I ask everybody at the beginning of kind of a pre-interview is what they’re most excited about in life or business or health and you mentioned just the company, Linksoul that you’re excited about the brand and what it’s doing.

And I wanted to ask you about that brand and direct mail in just a minute, but in your role in that can you talk to me a little bit about the brand? Because I saw something when I was researching it, looking at it, you know, it’s kind of this interesting mix of a California-based surfing beach brand with a golf heart mixed in there as well.

And for someone who’s not a part of that or someone if you’re pitching me that, I’d say they were very different demographics, you know, kind of the surfing and the golfing, but you seem to have married them beautifully. How does that work? Talk to me a little bit about that.

McGregor: You know, it is kind of an unusual intersection, but what I’m finding it really does exist here in Southern California. And, you know, that’s the founders, you know, they’ve lived the lifestyles portrayed by the brand, which is what I think makes it successful. It is not a manufactured story, you know, it really is authentic, you know. We’ve done things like we’ve restored our local municipal golf course here and taking over, running that.

So we have our own golf course, that we sort of saved from going to developers, you know, our founder John Ashworth, he’s been in the golf apparel world forever. He had a very successful company back in the ’90s Ashworth Apparel, you know, any of the golfers out there that have played for awhile probably have heard of it. But it’s a lifestyle that exists out here for a lot of people in California.

And I think it’s intriguing and appealing to, you know, people across the country. And, you know, marrying that up with some really killer product that, you know, you don’t have to be in California or where you don’t have to be a surfer or where you don’t have to be a golfer, where it’s been successful for us, but telling that story, you know, we kinda of see it as we’re not selling golf clothing, you know.

If you come to us because you like our clothing and you buy it from us, and we can introduce you to the game of golf and we can show you that golf doesn’t have to be, you know, the sort of inaccessible or exclusive thing then that gets us most excited. If we could sell you a shirt and get you to pick up a golf club, that’s the biggest win we can get.

Revenue Through Direct Mail

Andrew: How much of the revenue at Linksoul do you guys drive through direct mail? And when I say direct mail most people I’m sure know what I mean, but I’m talking about offline. So usually, you know, print stuff that you stick in the mail and people actually physically pick up in their mailbox. So what percentage of revenue does that drive for Linksoul?

McGregor: That, of course, is a little bit of a tricky question. That’s really an attribution question at heart, but I can answer that simply give a little bit of detail. But, you know, we go through it, it’s called the match back process. So we know who we mail catalogs to and then we know who made a purchase. And when we look at that through a certain lens of a certain amount of time in those kind of things like, you know, we use 45 days we could see that, you know, about this year, it’s shaping up to be about 40% of our sales coming through direct mail.

I think part of that it’s a little misleading. We have a really huge chunk of our sales that tie back to e-mail marketing and a lot of those e-mail addresses we have because we mail that person, you know, a catalog. And those are really representative of the downstream revenue that comes from the catalog. So I think looking at it, you know, you can never get the attribution picture totally right or looking at, you know, where is that first order coming from, you know, almost half the people that coming from the catalog and that’s shifting a little bit, but it’s big for us, you know.

A Look At ROI Across All Channels

Andrew: So how does the ROI stack up relative to other channels for direct mail when you’re looking at the attribution and the calculations can be a little squishy based on some of the stuff that you just mentioned. But when you compare it to things like e-mail, PPC on Google, Facebook Ads, things like that, how does the ROI look when you’re looking at direct mail?

McGregor: Well, there is an important distinction to make there. So we use direct mail pretty much in two ways. One is for prospecting, so it’s getting in front of people that we wanna convert, we wanna buy. The ROI in that is pretty difficult, you know, it’s not really possible for a lot of businesses to make money on it anymore in the first purchase and that’s why you gotta look at things like lifetime value. So the ROI on that front is not great, but, you know, digital, each ad units is a lot cheaper, but the response rate is slower.

So digital is pretty expensive too. So, on the prospecting side it’s a little less of a positive ROI that our digital programs for us what we’ve seen, where we really see super, super, super good ROI is mailing our buyer file and, you know, next to e-mail marketing it’s really the best thing, the best lever that we can pull to get a direct response out of our existing customers, and drive additional purchases, you know, and increase their lifetime value.

So the ROI is terrific when mailing our buyer file or our house file, whatever you wanna call it. ROI not so great prospecting at a loss when we go after new customers.

Prospecting for Gold

Andrew: That makes a lot of sense. So obviously if you’re prospecting, where do you get those prospects? Are you buying, are you purchasing the lists? How are you prospecting and getting those names?

McGregor: Yeah, that’s a great question. There used to be several different ways to go about getting those lists that used to work maybe 20 years ago. Now, the only thing that really works for a lot of people are going to… There’s pretty much five or six databases. And these are companies that have been around forever that have been supplying names to direct mailers forever. And if you used a credit card in the U.S. they’ve got you in their database with some transactional history associated with it.

So what we do is we take our existing buyers and their transactional data. We feed it to these guys and it’s called a cooperative database because this is generally how it works, you have to contribute names of the data into it to get names of data out of it, you know, and then, of course, you pay them on top of that for their service. So, we will contribute our customer data in there and say, “Hey, give us people that look like this.” And really, you know, Facebook’s finally gotten around to doing this in a pretty similar way, but it’s basically just lookalike audiences.

So that’s been around in the direct mail world for a long, long time. And, you know, Facebook’s finally kinda gotten onboard with that in a big way and but really you kind of think of it like a lookalike audience, you know. You have to go through different processes and mechanisms, and it’s not a sort of self-service interface like Facebook provides. You gotta deal with brokers, list brokers, and things like that, agents of these databases.

But at the end of the day, you’re giving them your customers and what they bought, and they are using various algorithms to give you back qualified leads.

Best Companies for Leads

Andrew: And you mentioned those four or five companies. Could you… You don’t have to name all five, but the ones that come to mind, could you name who those are because people wanna follow up with.

McGregor: Yeah, sure. And some of these I’ve worked with for so long that I think some of them have been rebranded. So I must speak, you know, I might be saying the old name of some of these, but, you know, a couple of them so off top of the head are iBehavior, company called Wiland, one is Abacus or I think that one’s now called Epsilon actually, Oracle, Wiland, iBehavior, Abacus, that’s four. There is kind of a new entrant into the space called Path2Response and I think there’s one more out there that I’m probably forgetting, but that’s a couple of them.

On Creating Lookalike Lists

Andrew: And how much and I’m sure it’s gonna vary if you’re trying to create a lookalike list for people who buy high-end plutonium for nuclear reactors. I’m guessing that’s gonna be a probably more expensive list than if you’re buying someone whose trying to get demographic who buys, you know, silverware or something. So, you know, there’s gonna be a lot of variation in there, but roughly like if someone was starting an apparel brand today, roughly what would it cost if they had 1,000 customers to try to get another 1,000 prospects?

McGregor: Well, actually, where the pricing works is, you know, you really don’t pay, it averages out maybe to 7 or 8 cents per name after you dedupe your list and things like that. You match up the list into different databases, by the end of the day, you know, and my point and my assumption is we’re gonna spend about, you know, 7 or 8 cents per name that we get from the databases. And that really shouldn’t vary whether you’re selling apparel or you’re selling trolling motors or, you know, whatever else you might be selling, you know, they’re just purely trading names.

So if you’re just starting out, you know, and you don’t have a lot of data that you, you know, you can basically still talk to them and they will let you get names out of their database, but you kinda have, you know, a bit of a promise that you’ll keep working with them and as your customer file grows, you’ll feed the names back into their database and, you know, support their ecosystem. You know, but that’s kind of it.

So, you know, you’re talking, you know, 7, 8 cents per name, you know, really, you probably if you’re prospecting you wanna mail, I don’t know, anywhere from 25,000 to 50,000 pieces to really get a significant read that’s kind of a starting point in terms of volume. You know, and then you have the printing and one of the biggest pieces of the cost structure of direct mail is the postage, you know.

So it adds up pretty quick and then you have creative cost, which depending on how you approach at, those could be extremely expensive too. But in terms of just getting the names assuming, you know, you’ve got the direct mail piece, you know, designed and, you know, you’ve got a way to print it cost-effectively, and get it in the mail, the names themselves, you’re going to spend 7 to 8 cents per name and you wanna be taking them in chunks of 25,000 or 50,000.

Different Mailers, Different Folks

Andrew: Interesting. That’s oh, so when you think about the different… I’m sure you send different pieces you mentioned catalogs or maybe you don’t mention, assume. Can you give me a sense of what different types of mailers you send out? There’s the catalog, which you alluded to, we’re all familiar with big, thick, glossy, nice beautiful pictures. What other ones do you send? And, you know, what goes into those, you know, determining what different types of media to send to different people at different times?

McGregor: Well, you know, the catalog is definitely the thrust of it. And, you know, you can test and iterate on the catalog for men, the creative, you know. It probably wouldn’t go as wild as you would with multi-variant testing, digital ads. So you tend to gonna have one main piece you send. Now, something else that I think is interesting and is new, I kind of lump it under digital even though technically it’s a direct mail touch point is this postcard program where we’re doing with a company called NaviStone.

And if you come to the website and you leave without making a purchase, and 24 hours later we’re gonna send you a postcard. And that can be tailored to, you know, have imagery from a category you were looking at, it can be targeted just like a display ad can. You can always think of it as an offline display ad.

So that’s kind of interesting way that we’re using direct mail that’s not just a static catalog that we’re sending to our buyers and to our prospects, back on, you know, the side of mailing those guys, mailing our buyers and our prospects, there are smaller catalog formats where you start to see postage breaks. So that’s kind of where we like to test, you know, rather than testing different creative’s or different covers, you know, we recently tested what we call a Slim Jim.

We normally have a 52-page catalog it’s like, you know, 8 by 10, this is a smaller thing, about half the size of it, only 16 pages and because of the special format the postage price is significantly less like 40% less than we’d normally pay for postage and that’s one of the biggest expenses of the catalog.

So, you know, we tested, well, are we gonna lose, you know, more sales than money we save from sending the small book versus the big book. In the very recent tests that we ran, we actually found that it wasn’t worth it. We were better off sending the big book to our customers.

Those are the kind of tests that we do. It’s like, can we mail a smaller piece, can we mail, you know, a more cost-effective piece that allow us to do even more prospecting or mail our buyer file more efficiently. You know, and then we have something like I mentioned the sort of remarketing touch point of this trigger postcard program. But that’s about the extent of the ways we’re using direct mail today.

The Trigger Postcard

Andrew: The trigger postcard program that’s something that I’m guessing you could really like do with log-in customers you have their address because they’re… Was there any other way you could, I mean, if you could do that for universally, everyone who can be at your website that would be phenomenal. But I’m guessing that’s impossible, right?

McGregor: This where you sort of get into the, you know, little spooky, you know, world of, you know, data crunching and like, this kinda goes back to databases too. You know, we’re not doing it based off of logs. I guess you could probably come up with a way to do it that way. What we’re doing is we’re utilizing basically a massive cookie network.

So if you’ve logged-in on any of these sites or made a purchase on any of these sites or identified yourself in some trackable way across many, many, many websites, they’re able to match for us. And that’s, you know, there’s a couple companies. We’re using one called NaviStone, there’s another one called PebblePost. I think there’s maybe a few others out there, but, you know, we are matching that I think probably about 35%, right?

So of that bucket of people that we know aren’t existing buyers from us or not existing customers, people that just came, prospects that we spent money to drive to the website who left without converting, about 35% of those through the dark magic of the big data we’re able to match up and send them like a postcard, you know. And the cost starting out for that is 75 cents per postcard which, you know, normally like, you know, our big 52-page catalog would be something like 65 cents to put in the mail.

On this thing it’s just 75 cents just for a little postcard, but, you know, you’re paying for the technology, it allows you to deploy it within 24 hours and the matching, and everything else.

On that program, you know, we’ve been seeing anywhere between, you know, three to four to one return on that. You know, of course, you gotta factor in the other marketing costs you spend to get that person to your website, but when you look at it by itself it’s been pretty effective for us. And we’re just starting to get to the point where, you know, we’re tailoring the creative based on what the person was looking at on the website.

Andrew: If you aren’t convinced already in 1984 it has arrived…

McGregor: Yeah. It’s been alive with the direct mail world for a long time and, you know, now, all of the internet and digital ad platforms, and data collection is just supercharged in a big way. So, you know, on a personal level it… costs a little bit. But as a marketer I know as long as what we’re doing is good, we’re not trying to get in front of not do anything bad, I’m not trying to get in front of anybody we don’t wanna be in front of, you know, it can be a really effective way to reach out to people. Particularly, when you’re trying to create that demand and not just capture it through things like paid search.

Designing a Print Catalog

Andrew: Yeah. So we talked about a little bit about ROI a rough sense, how you get the names for prospects or, you know, targeting your existing e-mail list. Let’s talk about design. What goes into, let’s say somebody wants to start, you know, just a regular catalog, what goes in and it’s just gonna vary based on the niche, of course. But what should, what maybe two or three things when somebody’s thinking about putting together a print catalog that they should really focus on in getting right?

McGregor: Well, again, I’m just gonna reiterate this, you know, the product has to be good. You wanna have some other validation hopefully that you have a product people wanna buy before doing this because it is expensive, you know. It’s a big cash outlay to get a direct mail program up and running. Now, there’s various ways to do that, but even at a lower end, you know, it’s still a chunk of change you’re gonna have to put out. It’s not quite as scrappy as, you know, getting up and running as in the digital platforms.

But in terms of the creative, you know, there’s a bunch of tips and tricks that, you know, the wisdom of 30 years of direct mail have brought up. But, you know, you wanna have a really compelling cover shot that goes without saying, I mean, the cover you can kind of think of like your subject line, right? So, you wanna give something that’s intriguing that’s gonna get those people to at least open up the catalog to pages two and three. And that first spread, that two or three spread is the most important spread in the book.

So working at an agency you see this a lot, you know, you have these people that are really passionate about their brands, they are passionate about their story, you know, there are these interesting people as founders, and they wanna take, you know, the space on pages two and three, and they wanna tell their story and show a nice picture not show any product, you know. And that’s just one of those big mistakes like what you do on that first spread could, you know, can make or break the book honestly, you know. So you wanna be putting your best foot forward.

Think about the cover as subject line and then, you know, think about what is your very best most widely-appealing product, you know, put your best foot forward on pages two and three, and then get deeper into your product catalog, the deeper the catalog goes. And then the back cover also is pretty important too because, you know, they will come in the mail and people will see the back and the front cover before they open it up.

So, you know, front cover, pages two and three, and the back. And you wanna really have, you know, compelling creative. It depends on what you’re selling. With apparel, you know, we probably spend more effort than you would have to, to sell, you know, electronics or commodity goods, you know. We go on location, we got to get the right models, we gotta make sure the clothes fit, we gotta have a stylist there to make sure that, you know, when we take the shot that the clothes look just exceptional on the guy.

So it’s a little trickier for apparel, you know. So, it depends on what you’re selling like, that creative effort is going to vary a lot depending on the product that you’re selling. But for us, it’s a lot goes into the photo shoot, a lot goes into the graphic design.

Printing Costs

Andrew: And what about for printing? I was gonna ask you what it costs you to print your catalog, but the variety in terms of you could and you could go get over, you could spend 100k I’m sure to put together a catalog if you went to the moon. But maybe we can move a little bit into the printing. So you’ve got your lists, your names, you’ve got the catalog designed, and it comes time to actually printing it out, a lot of different things here.

If somebody is let’s say you’re doing a run of let’s say 10,000 catalogs. What for maybe a catalog of let’s say 30 pages, what does that cost? Is that something in color is that gonna cost $1 at scale? Is that gonna cost $6 or $7 at scale?

McGregor: So, you know, I think a way to look at it is and this is how we kind of roll-up, and look at cost in our life with the catalogs is we look at cost per book. We call it cost per piece and revenue per piece. And, you know, say for us it’s 65 cents to, you know, get that catalog in the mail, you know, probably 10% of that is gonna be printing.

And the lion’s share of that 65 cents is gonna be postage if it’s not, you know, postcard or Slim Jim or one of these alternate formats, you know, you’re gonna spend 35 to 40 cents depending on the lion you’re sending. You know, on postage for piece, 35 to 40 cents of a 65-cent piece, right? So that’s the biggest expense right there. Printing, you know, is probably 10% of that total cost once you find a good partner.

Andrew: McGregor, even for a big catalog like a 30-page color catalog? You’re looking at 10% of the cost of a 60-cent stamp it’s you’re only looking at pennies to print that?

McGregor: You are. I mean, really, the printing companies, you know, various market forces have gotten very cheap, very competitive, and you can print really effectively. Now, look, if you go to somebody and you’re like, “I’m only gonna print, you know, 100 to 500 or 1,000 catalogs, I’m gonna stuff in my outgoing shipments,” which by the way is another great use of catalogs, you know, you’re gonna pay much more for printing.

But if you have, you know, a direct mail program not even a huge one, I’m not talking J.Crew I’m talking, you know, what we’re sending through Linksoul maybe 100,000, 200,000, 300,000 catalogs per season. And maybe you have four to six seasons a year, you know. That kind of volume yeah, you’re talking about really pennies. It’s a penny business when you get down to it.

Andrew: That’s amazing. I would have guessed one of those catalogs would have been $2, $3 or $4 dollars to produce, which is…

McGregor: No, it’s great. I don’t know, are you familiar with the company Everlane?

Andrew: Oh, no.

McGregor: Okay. They’re one of my favorite apparel companies. And they were one of the first in the apparel space to come out and say, “Look, we’re gonna make products in the same factories as these super high-end brands, but we are gonna sell online, direct to consumer, no wholesale, no added cost. So we’re gonna sell it to you basically at what, you know, retailers pay wholesale for it.”

So, you know, at a fraction of the cost you’re getting something that’s the same quality, you know, you would buy in a very high-end store from a very high-end brand. And they have, you know, you should anyway you should check it out. Their whole model is transparency.

So if you go to a product page they’ll actually give you a breakdown for the material, for the production. They’ll show you the whole cost structure for it and what they’re selling it to you, and what their markup is. And, you know, in the apparel world we usually like to keep that, you know, pretty oblique. That’s kind of radical for someone to open up the robe and show you what that cost structure is.

But, you know, when they mailed their catalog and they have a catalog, and it’s interesting, I’ve only received it a few times. I think they’re just testing a little bit, but even on the back of the catalog every piece of marketing, they show you what that cost breakdown is, you know. And there’s was like, I think 68 or 70 cents or something. What we’re thinking, “Well, I know that they’re not lying because that’s pretty close.” And we were thinking, “Well, they could probably get a better deal if they, you know, switch printers or something.” But, you know, it’s…

Andrew: Very cool. I’ll check them out. I like that model, it’s interesting.

McGregor: Yeah.

Elements of a Killer Catalog

Andrew: What if someone thinking about doing a catalog here, you’ve got, you know, all the elements of this, you’ve got just to get a catalog out the door, you’ve got the design elements, of course, the printing, and then the mailing. Should you have that, you know, back when we were talking before we hopped on here working for, you know, working at your company where you really handled a lot of not even just the printing and mailing, but all of the logistics and fulfillment returns for brands.

So you’re familiar with this world. Should somebody try to patch these all through these together with different companies? Because there’s the specialization allows them to do a really good job or especially starting out, are there really good choices for someone who can do the design, the printing, and the mailing all under one roof?

McGregor: So, there are a couple of companies that could do that, there’s a couple of agencies that could do that. My old company, you know, is one of them to plug them a little bit Phoenix Direct.

Andrew: And they are can you mention them?

McGregor: They’re not actually based at Phoenix, they are based out of Atlanta or near Atlanta, you know. They offer some other services as well as customer service fulfillment’s, turnkey thing. But one of the things they do really well is they produce catalogs they deal with the creative, the coordination, the mail planning, the printing, the reporting, all that stuff.

You’re gonna end up, you know, you’re probably best to find someone who has experience doing it and there’s consultants out there too, you know, someone you can pay, you know, they call a mail planner. You could pay some of these people just a couple of thousand bucks a month and they will coordinate all those pieces I just talked about.

They will help you do your forecasting, they will help you plan out your mail plan, you know. A lot of these people have been around a very long time, so they’re seasoned and they’ll keep you from stepping in some really big holes that’s super valuable.

And they can even help you, you know, find and negotiate contracts with printers and, you know, that’s really, you know, you have up to three kinds of parties you have to deal with, you have, you know, the creative piece to get the catalog designed, you have the mail planning piece, the strategic piece of that about, you know, what your costs are gonna be, how many you’re gonna send, what you expect to get, and then you have the printing that you deal with.

And most of the printers out there they’ll actually interface with the postal service to get those in the mail and there’s things like cost savings where they can, you know, you can do certain dates where you co-mail with other companies that are sending catalogs and get some savings there.

But, you know, there are some places that are one-stop shops like my old company, Phoenix Direct that was one of the things we did. We try to roll it all up, the whole direct-to-consumer model and to just, you know, one party you dealt with. But there are plenty of companies that do specialize in, you know, direct mailing catalog production. Just a couple off of the top of my head, CohereOne is one that’s on the West Coast.

They do all those services, they are a consultancy that will help you get all that stuff done, they’re not just a consultancy, they’ll do the design work and stuff too, you know.

Belardi/Ostroy is another one. There’s actually quite a few of them out there, but doing it yourself probably not recommended unless you personally have experience with it. There’s just, you know, so much wisdom that you can stand on the shoulders of the people that went before you and hire someone that will keep you from stepping at big holes, and make sure you have confidence in spending what, you know, will end up to be a pretty significant amount of money.

Monitoring The Catalog Customer

Andrew: When do you stop sending to someone, you know, kinda in the e-mail world we’ve got this idea of keeping a healthy list and managing open rates. And if people haven’t, you know, opened an e-mail from you in six months it’s probably time to stop sending to them for the sake of the list and raise some other reasons. How do you think about that with direct mail? Do you stop sending to people and if you do, what kind of process is that.

McGregor: Yeah. I mean, it’s just it’s not vastly different from the concept of approaching e-mail, you know. It’s all about segmenting, and bucketing your customers, and then tracking them. You know, what I’ve seen is that yeah, like, you know, once you get someone who hasn’t bought from you in over a year, those people are certainly gonna perform worse than the people that have made a purchase from you in the trailing 12 months.

But a lot of times, you can justify, you know, mailings of pretty, pretty old customers and you end up reactivating them. In our case at Linksoul, we’ve just stopped mailing customers that are, you know, older than two years. But really, you just segment them up, and you track them, and, you know, you know what your cost is, and you know what you’re getting from each of those segments, that you start to see where it stops making sense, and you cut those people out.

Measuring Success in Print

Andrew: How do you guys think about…we touched on this a little bit early on about attribution in measuring success. One way that you alluded to or mentioned was that you can just track, you know who you’re sending to, you know they’re in your customer database and so you can sense how effective they are but how and I guess on the prospect side too if they’re not in your database already, you’re probably pretty sure they’ve emailed and that was a trigger but do you tie a lot of things like coupons for example?

Do you tie a lot of attribution tracking with unique coupons for different mailings to be able to attribute sales to that channel? How religiously or religious are you about tracking success tying that in? And how much are you open to this thing like, you know, applying that old advertising adage, you know, half your ad spend is wasted, you just don’t know which half and how open are you to saying that, “This is something we know probably is coming back to us, even if we can’t track it we’re gonna continue to do it because we just know in our gut or we anecdotally feel like it’s working”?

McGregor: Well, the nice thing is, you know, there’s a process that exists where you do know, you know, 100% or close to, you know, close to certainty, you know exactly who you mailed and you know exactly who purchased from you, you know. So you’re really getting pretty darn close to having a complete picture and, you know, I should mention that’s one of the third-party you would deal with is we used to call them service bureaus, all catalog companies.

So basically a data company, a company that will take your mailing file, ingest it, and then take your order files in the backend, adjust that, and do various, you know, processes on the data to match back with a lot of certainty where you know.

So you don’t actually need the coupon codes as a way to say, “Oh, this was used X number of times, so we’re confident about that.” You can actually use that match back data with quite a bit of certainty. Now, on top of that, you should probably particularly on your prospecting campaigns that you send out, you probably should, you know, test putting an offer, you know, on the front or back of that catalog, and, you know, putting a coupon code on there.

But at the end of the day, you know, you could go out there and get a company to do this match back for you and know very confidently, you know, who you mailed, and who ended up ordering from you.

Direct Mail Mistakes to Avoid

Andrew: What mistakes have you guys made with direct mail that other people can hopefully avoid?

McGregor: I think some of the biggest pitfalls which you kinda get the fundamentals down, you know, would be probably under merchandising a catalog. That will hurt you, you know, having really not enough product to put in a catalog. And now, you don’t have to have like a 50-page or 100-page book, but you’ve gotta have product density and a product assortment relative to the cost of your piece.

But, you know, if you’re selling less, you know, probably than let’s say 50 products, there’s probably no direct mail format that’s gonna work out for you, you know. The number of products in the catalog what you’re putting in front of people is extremely important to how that performs.

So, you know, maybe going and doing catalog too early is something that can, you know, cost you some money and burn you a little bit. Again, a super common mistake is not utilizing those key spaces on the catalog. Again, putting that founder’s note, on spread two and three at the beginning instead of product that will dramatically in some cases, affect the performance of the catalog.

That’s a really common one because everyone thinks their story is unique enough and compelling enough that the story is good enough to put there and that will suck them into the rest of the catalog and they’ll keep shopping. But, you know, no matter how good that story is that it’s usually not the case.

And, you know, even Linksoul, even in the beginning again some of our advice, you know, we had that note in the front and now, if you look at… You know, I think it would be really interesting, you know, when we do this sometime, when you take a look in our first catalog, we take a look at the catalog now we look at the differences. And some of the things we’ve improved on that have had a big impact on making that catalog perform better is really utilizing those key places in the catalog while making sure we have good merchandise density.

And then really on the photography side, focusing on product detail, you know, we used to kinda photograph and show product like you would see on a category page on a website.

So I’ll lay down just a bunch of shirts next to each other with the pricing information the networks find online, but you get a lot better response when there are more romantic shots. And I’m not necessarily talking about it being on a model, but if you have a sweater, and getting up close, and showing what that texture is like, giving some sense if the item has a unique detail to it.

Make sure you obviously show that visually not just, you know, mention it in the copy block, you know. At the end of the day, you know, you’re selling pictures. That’s what you’re doing with the catalog. So you better have really, really good pictures, the quality of those pictures correlate directly to the performance of the catalog.

The Future of Direct Mail

Andrew: One last question before we kinda wrap up and do the lightning round in closing. But do you feel like we have the potential to come full circle on advertising, you look at direct mail, you know, 25 years ago before they have an internet and e-mail, and that was where so much promotion came from.

And granted we still get a lot of junk mail today, but I don’t see the overload for most people is digital on their phones and their inboxes, and, you know, maybe even on TV, on a screen somewhere, do you think we’ve come or are coming full circle where using direct mail is gonna be an advantage just because it’s a channel that so few people online are using right now?

McGregor: I think it is. I think particularly for the new breed of retailers out there that grew up digital, grew up in digital, grew up in e-commerce, you know, they’ve written off a lot of those older tactics, the direct mail is one of them. So I kind of see two scenarios quite often.

One is an old company that doesn’t have the confidence or the appetite for risk to really expand into new digital channels and the other is the newer companies that do all that stuff extremely well, they’ve got all their digital channels like, you know, like finely-tuned machines, and they’re looking for places to grow. And, you know, I think a lot of them might not even think about direct mail, it’s not sexy, it’s sort of an old tool. But as a result, you know, a lot of those newer companies aren’t using that touch point.

And I think for us it’s, you know, it’s been good, there’s a good bit of men’s apparel. So that one is not…that one is, you know, fairly populated, you know, in the catalog space, but I could think of some other categories of products we’re selling where people just aren’t using direct mail at all or not using it very much. And, you know, now, I think for a lot of the new school guys who has sort of tapped out their growth on these digital channels.

There’s ways to use direct mail, you know, to kind of push past that plateau and even use it in ways like the triggered postcard program I mentioned, you know, use it in ways to complement your digital program, you know. It’s just one more touch point, you know. I kinda look at it I don’t care if I’m spending money online or offline. I just wanna find those most impactful touch points and, you know, fund those to grow the business.

The Lightning Round!

Andrew: Really good stuff. And kinda like a closing here on the personal side I wanna do a lightning round with you. So feel free of course to answer these rapid-fire. If you had to identify the number one thing you’re trying to optimize your life for right now, what would it be?

McGregor: Free time.

Andrew: Oh, who is someone you strongly disagree with?

McGregor: I feel like saying our president is kind of a cop-out, but I’m gonna go with the easy answer on that one. I think we all know who I’m talking about there.

Andrew: How much money is enough? What would be your number of money in the bank, the amount of money in the bank?

McGregor: Yeah. I think that one, you know, I know there’s various calculators and things out there. But, you know, for me personally I think, you know, $5 million would be an amount that, you know, you can manage, and draw from, and sustain a quality of life.

Andrew: What’s the worst investment you’ve made in the last 10 years?

McGregor: I’m a huge fan of Blue Apron when they went public. Now, honestly, I knew that I was way, way too rich when they went public. Anyway, that’s kind of an interesting business.

Andrew: Nice and what’s the best investment apart from any business that you’ve owned that you’ve made in the last 10 years?

McGregor: Let’s see. Well, I’ll keep it relevant and I’ll keep it in the stock market for us. So, not long after Shopify went public I’ve been a huge fan of the concept and the company for a long time and when they went public I’m like, “Yeah, sure. I’ll bet on these guys.”

Andrew: Very nice. And that one was right in front of so many of our faces that we didn’t even jump up on, myself included. And finally, the last question, what’s the first CD you ever owned?

McGregor: “Weird Al” Yankovic. I guess it’s got a great… I forget the album name, but it’s the one with the cover of “Gangster’s Paradise” on it.

Andrew: Oh, you’re bringing back memories, my friend, very nice. Well, McGregor, this has been awesome. I appreciate you. You kinda rolled back the curtain on some of your direct mail strategies, and thoughts, and ideas. And yeah, excited to see what you do with Linksoul in the future. And thanks for not only doing this but for being a member of the private community. It’s been great having you in there. I appreciate it.

McGregor: Yeah. You bet. That was a lot of information and, you know, feel free to…anyone could reach out to me and get more information, you know. I would say direct mail and catalog is can be a really, really good strategy to grow your business, but just approach it with the right amount of caution and make sure you know what you’re doing.

Andrew: Awesome. Thank you, sir.

McGregor: All right. Thank you, Andrew.

Andrew: That’s gonna do it for this week’s episode. But if you enjoyed what you heard, check us out at ecommercefuel.com where you’ll find the private vetted community for online store owners. And what makes us different from other online communities or forums is that we heavily vet everyone who joins to make sure that they have a meaningful experience to contribute to the broader conversation.

Everyone who we accept has to be doing at least a quarter million dollars in annual sales on their store. And our average member does seven figures plus in sales by their business. And so if that sounds interesting to you, if you wanna get, you know, connect with a group of experienced store owners online, check us out at ecommercefuel.com where you can learn more about membership as well as apply.

And I have to again thank our sponsors who help make this show possible, Klaviyo who makes e-mail segmentation easy and powerful. The cool thing about Klaviyo is they pull your entire catalog, customer, and sales history to help you build out incredibly powerful automatic segments that make you money on autopilot. If you’re not using them check them out and try them for free at Klaviyo.com.

And finally, Liquid Web, if you’re on WooCommerce, if you’re thinking about getting on WooCommerce, Liquid Web is the absolute best hosting platform for three reasons. One it’s built from the ground up for WooCommerce and optimized by some of the best industry professionals in the WooCommerce who work for that space that really know this stuff. It’s highly-elastic and scalable as well as comes with a whole suite of tools and performance tests to optimize your store. You can check them out and learn more about their hosted WooCommerce offering at ecommercefuel.com/liquidweb.

Thanks so much for listening. I really appreciate you tuning in and looking forward to talking to you again, next time.

Want to connect with and learn from other proven eCommerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight-knit, vetted group for store owners with at least a quarter million dollars in annual sales. You can learn more and apply for membership at eCommerceFuel.com. Thanks so much for listening, and I’m looking forward to seeing you again next time.

Today I sit down with Bill D’Alessandro to make some predictions for 2018. We make some bold eCommerce predictions about: What retail companies will go bankrupt in 2018 How Amazon may make getting your FBA inventory into retail shelves incredibly easy How the internet sales tax fiasco will shake out Subscribe: iTunes | Stitcher (With [...]

Andrew: Welcome to the eCommerceFuel podcast, the show dedicated to helping high six and seven figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow e-commerce entrepreneur Andrew Youderian.

Hey guys, it’s Andrew here, and welcome to the eCommerceFuel podcast. Thanks so much for tuning in to the show today. And today I’m gonna do something a little bit fun. I’m not sure if we’ve done it in the past, at least not regularly, but we’re going to put on our wildly speculative hats and make some bold predictions which we’ll almost certainly come to regret next year when we have to revisit them about what’s gonna happen in tech and e-commerce specifically in 2018. And joining me to talk about this is Mr. Bill DAlessandro from Elements Brands. Bill, welcome back sir.

Bill: Glad to be here. I love doing predictions with you. I won a steak in the last time.

Andrew: I know you did, which I still need to pay you, which I think is probably gonna have to…If I don’t pay you, if I don’t buy you a steak dinner in Laguna Beach for ECF fly this year then I owe you two steak dinners. I need to make it on that bet.

Bill: That seems fair.

Andrew: Yeah. And my apologies for being so tardy on.

Bill: No. It’s compounding at this point. This is great. Best investment I got.

Andrew: Yeah, I figured we’d, you know, just…It’s always fun making predictions. Hopefully people enjoy a little bit but we’ll just jump into them. I think you’ve got…I’ve got four for the next year, you’ve got five, so, why don’t kick us off Bill? What’s your first prediction for 2018?

Big Retailers Will Go Bankrupt

Bill: This comes from a state of mind that I’ve been in very recently as relates to work because, for those who don’t know, we manufacture and sell a bunch of consumer products, sunscreen, shampoo, bio lotion, water, detergent, etc. We sell in a number of big box retailers. We sold to Toys”R”Us, they just went bankrupt. We lost about four grand in receivables. We sell to Kroger, we sell to Bed Bath & Beyond, we sell to Kmart, we sell…You know, a bunch of the big box guys. And without naming names of any retailers that I’ve experienced this with, on multiple times, I have had some glimpses into their business model. I’ve talked to some people that work at retailers, and I’m crossing that with all of the news that has been coming out, you know, in headlines. My primary prediction for 2018 is that not only will retail continue to completely implode, but some big names will seek bankruptcy protection or get acquired. And the two that I picked out do not have to do with any of this information. I am predicting that Kroger seeks bankruptcy protection in 2018, which is massive because they’re the largest grocery in the United States, and that Target gets acquired in 2018.

Andrew: Wow, those are bold men. The Kroger…why Kroger? I mean, I don’t know much about their financials, but they’re everywhere. I mean, I buy them all the time obviously.

Bill: Yeah, they’re everywhere. They’re the most highly, not leverage in a debt sense but leverage in a business model sense to kind of the grocery and retail downturn. They are…if you look at their margins, they’re in the toilet. They’re trying to…You can look at it in the things that they’re doing. They’re trying to open restaurants in their grocery stores, they’re trying to launch…I think they’re gonna launch…They sell jewelry in some Krogers now, like fine jewelry. Like, they’re just trying…They’re racing just…They’re doubling down and doubling down. I’m talking about 100,000 square foot Krogers, that’s like twice size of the Casco. And they’ve gotten absolutely whack. The stock is down 40% after they missed earnings, and then Amazon announced that they were going into grocery. That was the day that stock was down 40%. Since the stock have been down 40%, the market as a whole is up like 30% to 40%, Kroger has only gotten 5% of the value back. I mean, they got real estate everywhere, they got leases everywhere. They’re kind of stuck in the middle, they’re not like the all the, you know, like this ultra low price model, and they’re also not on the high-end kind of this Whole Foods model, and the middle is really getting squeezed, so I think they’re cooked.

Andrew: Interesting. When you look at their profitability like are they just eking out profits just barely and barely making their debt payments or do they actually have a cushion and they’re just getting penalized by the market?

Bill: The gross margin…Gross margin on the grocery business is 28%. If you take out bill backs and, you know, miscellaneous like fees, sliding fees that they charge to vendors, their gross margin is -16%.

Andrew: Wow. Well, what are they making? Are they actually breaking even right now? Are they making money as a company?

Bill: I think they’re at like a 1% net.

Andrew: Wow. Okay. Crazy. And Target, you mentioned they’re going to be acquired. Who do you think like…I mean, who acquires…? Do you see Amazon taking them over and just turning them into warehouses/distribution centers like they did a little bit with Whole Foods? Who do you see acquiring them?

Bill: I’m sure Amazon looked at Target. Target has a bit of the same problem that Kroger has, is that they’re sort of stuck in the middle. It’s not super low price, it’s not super high price. They have a big grocery business as well at Target. The one thing Target does have going for them is their private label brand portfolio is very, very strong. They have a brand called Cat & Jack, which is a brand of kids clothing. They launched Cat & Jack and in its first year, it did something like 3 billion in sales. I mean, just stupid numbers because they have scale at retail and the brands are pretty well respected. But there have been several negative headlines about Target recently, but I think they have enough brand equity that…I don’t think they’re in as much trouble as Kroger, but I could see them getting acquired by either one of the cheaper guys that wants to kind of move up market or one of more luxury guys that thinks they can make it work rival the Target brand. I could maybe even…I don’t know. This is a wild guess, but I can maybe even see Walmart buying ’em.

Andrew: Wow. Okay. It seems like Walmart would be one of the only ones. I mean, so many people in that space are, especially in the low end, are just struggling. It seems like it’d be hard for them to be able to sell an acquisition or pull it off.

Bill: Yeah. I mean, we’re supposed to make bold predictions, right?

Andrew: No, no. It’s a great prediction. I just was trying to think through it, and play all devil’s advocate.

Bill: Yeah. I think the value in Target is in their private label brands, and I think someone’s going to want that.

Andrew: Cool. Interesting man. That will be a fun one to come back to. I’m feeling like put more of my skin on the game on some of these predictions now after that.

Bill: And disclaimer, I’m not trading any of this. I’m just talking.

Chinese Sellers to Disrupt the Market

Andrew: What a good disclaimer to make. So, my first prediction is, I think in 2017, we started to see, you know, Chinese manufacturers and sellers come on to Amazon in a somewhat meaningful way. I felt like a couple years ago I had a handful of conversations with people and, you know, talking about, oh someday China is gonna come on to Amazon, but there’s too much cultural issues and things that are difficult that make it hard for them to sell on the platform. That was on 2016 maybe, you saw a little bit of that, and in 2017, you started seeing them actually come on. And I think 2018 is gonna be the year where, in our market, sellers on China are really gonna start causing some serious disruption, both in terms of the pricing and in terms of quality control.

And there’s actually a hat tip to David Bryant of eCom crew, he wrote up a great article about this. I will link up to it. But this was something that…I mean, when you look at the stats, I think right now people speculate that it’s even from 10% to 25% of Amazon is currently Chinese sellers. I heard this a lot just on the ECF road trip that I did for ECF week. A lot of people just anecdotally talking about seeing a lot more people from China selling on Amazon. Amazon, there’s these trainings for, you know, over…There’s a lot of people doing trainings for Chinese sellers on how to sell into the U.S. market. Amazon has a conference for sellers over there. It also ties in the kind of Amazon’s long term play of just low pricing. I mean, if they can cut out middlemen and just get the same product straight from China, for them, that kind of ties into what they want for consumers.

And then you see stuff like Oberlo, Shopify by Oberlo, which I love Shopify, seem like a strange move to me. Oberlo is the platform that allows people to really build out a Shopify platform quickly and easily by sourcing products from Ali Express and pretty much drop-shipping them to the U.S. And this coming from a guy who has drop-shipping background, it just does not seem like…It seems like there’s a ton of those stores sprouting up and it seems between…doesn’t seem like it’s gonna end well. So anyway, prediction for me is that I think Chinese sellers are gonna be a big presence on Amazon this next year.

Bill: Do you think…I think, yeah, that trend will increase. What do you…and I know Amazon got their operation dragon boat where they’re trying to get Chinese products on Amazon for more selection and better pricing. What do you make of the political angle? So, a big part of it is ePacket of Chinese people being able to sell, you know, it ships on for a dollar into the States from China. And that seems like a Trump chopping block item when you think. I mean, what do you make about kind of the protectionist angle? Do you think it’s overblown?

Andrew: That’s a good point. I think…I don’t know. I think if anyone, you know, it’s much more likely this year given the administration having that actually get cut, but I don’t know if that’s on Trump’s radar. Like, I don’t know. I think it could happen. I think it’s more likely to happen this year than it has in the past, but I don’t know what the chances are. So, I mean, if you look at that, how much of that…Like if you boost…I wonder if there was a big tariff issue, because even if tariffs go up, that could still affect it a little bit but at the big thing, I think is their subsidized shipping which makes it probably the easiest. And I’m not sure how much that’s being targeted by people. Do you have any thoughts into that?

Bill: I don’t. I don’t know.

Andrew: Yeah, it’s a good point though. All right. So your next prediction, prediction number two for 2018.

Amazon FBA Coming to a Whole Foods Near You

Bill: Yeah. My next prediction is that Amazon FBA items will be made available on the shelves at Whole Foods.

Andrew: Hmm. Nice.

Bill: Meaning if you an Amazon FBA seller, I believe that you’re gonna get a little message in your seller account, and it’s gonna say, “Hey, we’ve identified that people in these zip codes purchase your product a lot or that we think it will go very well in these zip codes based on all the data that we have. Would you like to check this box to allow us to put it in Whole Foods store in that zip code?” You’ll just check box, Amazon, without any further effort from you, will take a few units out of FBA, stick them on the shelf using the same price, using the same everything, essentially on consignment, and when they sell through the register, they’ll pay you just as though it sold on amazon.com.

Andrew: Cool, I like it. Have they started? Has Amazon given any…I mean, they are obviously made changes in Whole Foods and that they own them. But have they started selling non-food items broadly in the Whole Foods network yet? Do you know?

Bill: Well, I saw a bunch of Amazon echoes, you know, right on launch day in a bunch of Whole Foods stores. This I haven’t heard, I’m making this up. I just think it makes too much sense, and as consumer products guy, getting products on to retail shelves is, A, such a massive hustle, B, such an inexact science, that I think Amazon is gonna bring the fact that…And also inventory for a retailer is such a huge use of cash. Amazon is gonna look at it and go, “We already have all these goods effectively on consignment in our warehouses. We might as well just put them on shelves that people are walking past and see if we sell any of them.”

Andrew: How would they determine…So that little box that pops up will be limited to crossover goods that, A, would make sense in Whole Foods, and B, we’re selling it like a certain threshold of the best sellers list because obviously…

Bill: Yeah, I’m sure.

Andrew: Yeah.

Bill: Yeah. They’d use data and, you know, they only do the ones that make sense. I mean, I’m sure it would be invite only. You know, I’m sure you couldn’t as a seller go, “I wanna be at Whole Foods.” You know, they would probably come to you.

Internet Sales Tax Coming to a Head

Andrew: Interesting. Cool. I like it man. Very cool. All right. My next prediction is I think the Internet sales tax issue is going to come to a head with momentum behind it in some kind of proposed legal resolution, either from Amazon side or something introduced in Congress. And it’s just…the sales tax issue today is so messy. There was that amnesty program that just wrapped up recently. And I think when you see how messy it is on one side and how much revenue is potentially being left on the table by people not complying, I think something’s gotta give. And I think you either see one or two things, you either see Amazon starting to collect sales tax from merchants and roll that out.

They’ve actually, just this last week or two, I think they started to allow that to be an option for residents of Washington. So, for collecting sales tax in Washington, Amazon is starting to collect that on behalf of merchants and submit it. So I think that will either get rolled out more broadly and you’ll see a lot of traction with that, you know, Amazon is starting to make deals like that with most states. Or if that doesn’t happen, I think the second tier thing is that you see somewhere pass something in Congress. I don’t know if it gets through, I don’t know if it gets passes, but you get something on the level of a bill introduced in Congress where maybe it’s a national sales tax, maybe it’s even some targeting Amazon specifically, especially with Trump. Trump has made quite a number of remarks, disparaging remarks about Amazon. So I think one of those two things we’ll see this next year.

Bill: I think I agree with that. I think the only risk to that is the fact that you’ve got Trump, who on one hand is a Republican but he’s a pretty populist Republican and he’s already tweeting about Amazon pay no tax. You’ve also got…I agree the situation is a complete mess. But you’ve also got a Congress that is predominantly Republican, predominately pro-business, and predominately anti-tax. So I wonder…I wonder how that plays into it. But it does need to be resolved for sure.

Andrew: That’s a good point. But I will say one thing if you look at it a little bit, they are pro-business, they are anti-tax, but they’re also looking at especially looking at places on a state by state basis. This isn’t something where it’s a state wide tax for our nation, or potentially it could be. Yeah, I know, that’s a good point. I was thinking that they might be a little more incentivized if they’re a state where they’re missing out on a lot of tax revenue from Amazon. The funds for their particular state, if a bill like this passed, could be advantageous enough to their coffers that might get them over there, there high level philosophy on taxation.

Bill: Very much. That is true.

Andrew: Yeah. All right, Bill, your next prediction.

Amazon To Go High-Fashion

Bill: Yeah. So my next prediction is also Amazon. I predict that Amazon acquires a large and a high profile consumer products brand, probably in the fashion space in 2018, something like Burberry, or something like a Kate Spade, or like something that is very high profile, very broad appeal, they buy it and they pull it from everywhere except amazon.com and make it prime exclusive.

Andrew: So like an exclusive but an exclusive sold by Amazon, it’s like in-house brand?

Bill: Yep. And I think, and the reason I predict this is, it’s very clear that Amazon strategy with the prime membership is that you’re gonna wanna be a prime member because if you’re not, you’re gonna miss out on a bunch of stuff. I mean, you’ve already seen it, like, some of the their Amazon products, like their Amazon Key and Camera, gotta be a prime member, all of their Amazon in-house private label brands, you gotta be a prime member, prime exclusive. There’s deals all the time at a prime member exclusive. It’s very clear that Amazon…And they’ve also tried…they’ve tried, in fashion too, so many times with private label brands. I think it’s clear Amazon wants to be a destination for brands, they want to have things that people can’t get anywhere else, just to further lock people in the Amazon ecosystem.

They’ve proven they’re not afraid to go out and buy something that they haven’t been able to crack themselves, ala Whole Foods. And while they do have a lot of private label brands, they have not been able to crack the Prestige brand, and I think it’s very tough because it’s at odds with the Amazon image, which is convenience and price, and a luxury brand is not those things. And I think they’re gonna have to go out and buy it, and I think they want to own it, and they’ll buy something really compelling that everyone knows, that everyone wants. And they’re going to make a big splash by pulling it out of all retail and people are gonna go, “I can’t get my Kate Spade stuff anymore,” and they’re gonna have to go back on Amazon to get it.

Andrew: Interesting. And I want to use your opinion on this. Let’s use Kate Spade as an example. If they did do that, do you think they’d still have a Kate Spade branded site that showcased everything that you could buy direct from there or on Amazon? Because I see with Amazon, they could definitely do it. But one of the things with Amazon is…one of the things that makes a brand so special and allows you to charge that premium is a lot of the merchandising, a lot of the attitude and the high end photography and the lifestyle that you can build in. Not that you can’t do that on Amazon, but it’s a lot harder at least from what I’ve seen for a lifestyle brand that take off on Amazon versus its own site, where you can really create that merchandising in that experience. So do you think that they would have both channels? Do you think that 100% Amazon is on the place to get and kill the retail site?

Bill: I think being that this would be a captive brand, they would make a lot of exceptions that are not available to brands today on Amazon. They would probably like, if you were on the right URLs, they would dramatically rescan the site or they would allow Amazon embedded commerce on katespade.com in a way that you just can’t…that’s much beyond pay with Amazon. I think they will bend the rules and experiment with it.

Andrew: So in 2022, when we’re doing this again, you may have the predictions that Amazon is gonna become, they’ve done a handful of years, they’re gonna become the place where, you know, up and coming brands pretty much sell to and Amazon just becomes the portfolio holding company for all of these high end or just noticeable brands in general.

Bill: Yeah, they’re just vacuuming up brands. I think it’s possible. They have demonstrated the desire to be private label and to vertically integrate and to kind of knock people off rather than try to buy them. But they also have a history of when they fail buying them, Quincy is a great example. They couldn’t put Quincy out of business and so they bought them. Whole Foods, they couldn’t get in grocery after years of trying, so they bought them. I think the same thing is going on with high end brands on Amazon.

Andrew: Well, they did it with…It’s not really a brand, but Zappos, they went and had a price battle for a long time and they weren’t able to…They kind of bullied…At least from what I’ve read, Zappos into sent to selling them out to them, they had the same thing, although they didn’t have a scale as much for brand, they’re more of a retailer.

Bill: Yeah, but totally that’s another great example. War of attrition, they couldn’t win, they bought ’em.

Big Legislation Against Tech

Andrew: Interesting. Love it man. All right, so my next prediction here is…It’s funny. You’re very Amazon type of focus. I’m a little bit more broader like regulatory focused as this is one will tell, but I think we’re gonna see some kind of legislation gaining support that’s introduced or at least a much growing course in the legislation space of antitrust against big tech. And I don’t know if it’s gonna be Amazon, I don’t know if it’s gonna be Facebook or if it’s gonna be Google, I think it’ll be one of those three. But you look at Amazon, how much power they have right now, you look at how much traffic those three control across the Internet, and…It’s Scott Galloway actually. It’s funny.

Right as I was waiting to record this with you, Scott Galloway from No Mercy, No Malice in L2 just published a piece how are they just on this actually. I’ll link up to that in the show notes. A couple of things he mentioned them. He mentioned that Amazon’s power to kill somebody is sheer price just by the fact they’re going into a space. So I don’t know if it’s totally justified from a purely antitrust standpoint, but how much power they do have, how much traffic they control, also looking at kind of the Trump administration we have now, I would be surprised if we didn’t see something at some teeth this next year on that front.

Bill: Yeah, I think that’s possible. It’s hard as you allude to. It’s hard because our current antitrust laws are not designed to prohibit any of this. I mean, Amazon has like a 2% share in grocery but Kroger stock create a 40% when they enter grocery. And they’re subsidizing, you know, all of their retail ambitions with all huge free cash flow from AWS. And our current antitrust laws are not built for Amazon. But at the same time this is the history of American business, you know, over and over again, subsidizing business expansion through a legacy or a cash flow other side of your business, a cash flow of the other side your business. So, I see it on both sides. I think if Amazon or Facebook or Google or whoever gets an antitrust case brought against them, it will be very, very rooted in populism and pitchforks and not very logical.

Andrew: Well, one of the hard parts too, is you look at Amazon and traditionally, antitrust is something that is breaking up big businesses because they’re unfairly creating monopoly or some sort of monopoly. And because usually monopolies for consumers are bad, I would argue with Facebook and Google, you can make a decent case for that. If you look at the cost per…At least…Well, I’m looking at it from the e-commerce advertising standpoint which isn’t necessarily their end consumer. But that monopoly allows Facebook and Google, given a duopoly kind of, to really jack up their prices.

Like it will be interesting, one of the questions I asked this year in the state of the merchant was, how much have your cost per acquisition advertising prices gone up which largely it can be covered on Facebook and Google. And I don’t have a hard number, but anecdotally looking at that column, they definitely are going up. And so, on that side you can make more of a case, but for Amazon, they do such a good job with Bezos’s customer first mentality, that the fact that the bigger Amazon gets, the better it is for consumers, maybe not in terms of the type of products they get, but for commodity items, they’re usually cheaper, they’re easier to get. Amazon’s done a great job of passing on their growth in terms of benefits to the consumer. And so, you try to make an antitrust case against Amazon on that, I think it’s harder.

Bill: I agree. Yeah. And so you’re bringing up a very interesting point, because you’re right about the Facebook, Google advertising duopoly, and the fact that they can jack up the bids and they can even price collude if they wanted to. I mean, although that would be illegal, but it hadn’t stop a lot of other people in past. But how do you fix it? I mean, you can’t break up Facebook. You know, you can’t be like, “All right, you 50% of people you’re on this other Facebook, and you 50% of people, you know, you’re over here.” How do you break up Facebook? You can’t divide it up. It’s a monopoly by vote of the people. They are network effects.

Andrew: Or you have Facebook Montana and Facebook North Carolina and Facebook…No, of course, not. I don’t know. That’s a good question. I don’t know how you do…I think Google, it’s maybe an easier case to break up Google. But even still, I mean, like what…I’m guessing here, but last time I remember what, 90% of their revenue comes from search ads that they generate, you know.

Bill: All the other parts of Google will be bankrupt instantly.

Andrew: Yeah. So, I don’t know how that works. Yeah, I don’t know. But I will say, I do think one thing that troubles me a little bi,t both you and I coming from similar places that have fairly free market, pro-business, of course. But looking at how much of the Internet now is controlled by Facebook and Google and Amazon, but especially Facebook and Google for traffic that’s not 100% commercial intent, it’s more content based like. That, I don’t like that. That scares me a little bit because you are seeing it…I think it’s getting a lot harder and I’m seeing merchants just being more beholden to the whims of those two platforms. And I would love to see. I don’t know…I don’t think the government can step in and create something that breaks that up and provides an alternative. That’s not gonna happen. But I would love, as unlikely as it is, I would love to see somebody come in and somehow disrupt that space where there’s so much concentration of those two. And I don’t know what happens and I don’t know how you break them up, but it’s troubling to me.

Bill: Yeah, it’s hard. And I agree. I’m also very a free market guy. And it troubles me as well because what you see is essentially a parallel Internet being built where, you know, publishing a web page doesn’t have the clout it used to have. You know, having a Facebook page, and how many fans you have, and can you reach those fans, and how much you have to pay to reach those fans, through a centralized kind of parallel platform. That’s not really what the Internet was designed for, and that is not the type of ecosystem that has led to a lot of the permissionless innovation that has been so successful on the Internet, that has made the Internet so successful and that has made these companies so successful.

So it almost looks like, you talk about a regulatory capture, but it’s almost like free market capture, like these two…Like the couple, and I don’t wanna say monopolist, but large companies have essentially captured the Internet and have succeeded in sort of putting a tax on the use of what is essentially, or what you could argue should be viewed as a public good or a utility, and regulated as such. There have been plenty of arguments made to that effect. So, do we want Facebook to control the Internet? But the weird thing is, is Facebook is just the users are voting on it. I mean, it’s a network effect, like the people want it that way and some ways it’s more valuable that you can just go on Facebook and find all the things you want. So yeah, it’s a hard problem to solve.

Andrew: Yeah, it’s tough. All right. Your next prediction of 2018.

No More Emails to Buyers on Amazon

Bill: This one is a little bit smaller, but I will predict that it is the end of Amazon sellers being able to email their buyers in 2018. I’m kind of surprised it hasn’t happened already. None of these post purchase emails, none of these, “Please leave us a review”. None of that. I think it’s a one way they’re going to clamp down. All Amazon’s customers, you can’t contact them at all.

Bill: Toast. If I own seller labs, I would sell it yesterday. Sorry, sorry to the guys, my friends over there that are listening.

Andrew: I’ll pass it along. Interesting that was…and Lars has been…Lars I’m gonna feature the hard laws about this, but he’s been…I think he’s been on that van. Better way kinda call him out for a while too.

Bill: He has been and I agree with him.

U.S. Sellers to Explore New Markets

Andrew: Yeah. This is my last prediction. I think in 2018 we’re gonna start seeing savvy kind of experience store owners that are looking to seriously expand for the first time start to look outside the U.S. as their primary place to do it. And not for everyone, but I think this is gonna be something we’re actually gonna see, at least start to take a hold of some sellers and for a couple reasons. One, the U.S. market is just gotten so competitive and at the same time you have other markets opening up. Example, Amazon Australia, brand new, just opening up this year. You know, you look at places like…even the market is so much smaller there, it’s so much less competitive.

And the second thing that kind of ties into my first prediction on seeing an increase in Chinese sellers for luxury brands or people who have a really high end luxury product, those kind of things in China with a growing middle class that’s getting access to the Internet, those are very highly covered at Western brands that are premium brands and there’s an enormous market over there. And I’m not gonna sugarcoat it and say that, you know, it’s gonna be easy to get into the Chinese market. There’s all sorts of cultural barriers and logistical issues. But if you can crack it and you can get your premium product over there, I think there’s a very enormous market that’s hungry for those kind of products. So between, you know, Asia, between Amazon Australia opening up and the fact that you’ve got more competition coming in from abroad, I think we’ll see exporting and foreign markets be something that people start taking a lot more seriously especially if they’ve got, let’s say, you know, a store doing, you know, 2 million to 5 million and they’re really getting, you know, seeing diminishing returns here in the States.

Bill: I completely agree. That to me was one of the biggest takeaway is from the FBA Boost Conference over the summer. It is clear that the international marketplaces are a strategic priority for Amazon and they are going to try to make it really, really easy for their U.S. sellers to unwrap and expand in the Europe. If Amazon wants it to happen at the level that it seem like they want it to happen at Boost, it’s gotta start happening more and more.

Andrew: And Bill, you’ve got the final prediction for us here.

Bill: Yep. So I wouldn’t be any fun if I didn’t make a prediction that I could be massively wrong on. So…

Bill: No. I’m leaving Bitcoin out of it. I’ll make a prediction that I think is similar to predicting the price of Bitcoin, but it’s a little bit more broadly applicable.

Andrew: Is this an Amazon stock price prediction?

The Stock Market Will Double

Bill: Nope, nope. It’s not. It’s even bigger than that. So this is a pretty broad prediction. Today, November 17th, 2017. And I think by the end of 2018, assuming the Republicans pass the tax reform bill in its current form, the stock market will nearly double in the next year.

Andrew: Oh Bill. Double to 50,000? Like double 50,000ish.

Bill: All right. Maybe double is too much, but nearly. I said nearly, and here’s why. Interest rates are zero. And I’m not necessarily saying the economy will be doing better, I’m saying asset prices will inflate dramatically because the new tax bill is going to free up a ton of cash particularly on the high end of the income scale, the people who tend to buy and hold assets. So, you’re gonna have basically more buying pressure on assets, which is gonna drive prices up, stocks, and real estate is a little bit of a different ballgame because you need someone to live in all the houses and you need to lease all the stores. So, I’m really mostly specifically talking about securities. I think the stock market is going to explode especially because interest rates are low, cost of capital is almost zero, people are chasing yield and taking risk in places where they shouldn’t. I’m not saying it won’t burn and crash, I’m saying we have a long way to go.

Andrew: Wow. This is interesting coming right off the heels of our biggest investing mistakes, mine being trying to turn the market.

Bill: This is a fun one. I’m out over my skis.

Andrew: I like the boldness. So let me play those out in a little bit argue against you, this one of your thoughts. So, Price to Earnings right now in the market is 25, right?

Bill: Oh, you and your P/Es, always with the P/Es.

Andrew: Okay. I will grade you. If you look at Price to Earnings on a technical basis like for Shopify or Amazon in a tech stock, I have come to terms that it’s not a good way especially in the short term to judge how a stock is gonna do. But a broader market across the entire economy? Like, that means you’re looking at a P/E of 50, which is nuts, and I mean, what like that…I think the broader stock market P/E, I’m kind of reaching here I might be wrong. In the tech crash of 2000, was, you know, probably 50. So, you’re saying we’re gonna have a run up that could be as big just based on capital freed up and low interest rates that rivals the 2000s.

Bill: Yes, and chasing yield. It’s almost more of a supply demand type thing. Tons of capital chasing only so many securities.

Andrew: Interesting. So for me, I wonder if…I agree with you. I think there’s a good chance asset prices will keep going up. But I feel like it’d be more likely to see those in the real estate market versus asset prices, because maybe this is me just kind of projecting how I feel, odd to everyone else in the world, which is not very fair. But if I’m gonna pay for something like that, I would rather have the house, you’ve got utility, you’ve got something solid you can touch. There’s still a lot of places where we’re not anywhere near, I think…We’re probably actually at a price level close to where we were in 2008, but that was, you know, 10 years ago. I’m not making any…That’s just my gut feel, I’m not making a very coherent logical argument against that apart from the fact, that’s crazy man.

Bill: It’s crazy, but my case is not that individuals are buying stocks. And I also wanna be clear. I don’t know that this is a very, you know, “Good thing” because I think it’s gonna exacerbate the concentration of wealth because there’s gonna be huge wealth creation in people who are already rich and already on stocks. And when I’m talking about upward price pressure, all this capital freed up and remember, I caveated this by saying if the Republicans pass a broad sweeping tax reform bill. Of course, it will benefit people, wealthier people more, it’s gonna free up a ton of institutional capital, and I think there’s gonna be a ton of institutional private equity scale capital, a hedge fund scale capital chasing return. And that’s what’s gonna drive up asset prices, rather than, you know, you and I buying it out for our one case.

Andrew: Yeah. What about on the backend to that. I mean, you mentioned there could be…Do you think that’s gonna be the new normal or do you think that’s gonna set us up for a catastrophic crash that, you know, 2008 makes 2018 looks like peanuts.

Bill: One prediction at a time my friend.

Andrew: Fair enough. Well Bill, we’ll have to circle back around here and revisit this in 2018 especially that last one man, that’s a doozy. But this has been fun, always fun to just totally make wild predictions and see how they come out. And yeah, I appreciate you coming on man.

Bill: Yep. Talk to you next time.

Andrew: Want to connect with and learn from other proven e-commerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight-knit, vetted group for store owners with at least $0.25 million in annual sales. You can learn more and apply for membership at ecommercefuel.com. Thanks so much for listening and I’m looking forward to seeing you again next time.

Anastasia, the owner of AsildaStore.com, makes some cool stuff. She designs unique patches and pins for photographers, travelers and people who love adventure. I’ve got her stuff on my bags, in my van and even on some of my kid’s stuff. But perhaps the coolest part of her story is how she launched her store: [...]

She designs unique patches and pins for photographers, travelers and people who love adventure. I’ve got her stuff on my bags, in my van and even on some of my kid’s stuff.

But perhaps the coolest part of her story is how she launched her store: she leveraged the readership of her popular blog to jump­start the business. So she knows a thing or two about building and connecting with an audience via the written word.

In my discussion with her you’ll learn:

Why she’s not overly concerned with SEO and keywords when it comes to blogging

Her thoughts on Shopify’s blogging tools (and how they compares to WordPress)

Andrew: Welcome to the eCommerceFuel podcast, the show dedicated to helping high six and seven-figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow e-commerce entrepreneur, Andrew Youderian.

Hey guys, Andrew here. And welcome to the eCommerceFuel podcast. Thanks so much for tuning in today. We’re gonna be continuing the discussion, I guess you could say, on blogging, which we kicked off last week with Andy from PlumDeluxe.com where they’re able to generate mind-bending two-thirds, almost, of their sales from their blog, which is just wild. And today, bringing on someone else who is as equally accomplished in the e-commerce blogging space, and that’s Anastasia, another private community member who runs asildastore.com where she sells really cool patches and pins kind of in the adventuring, travel and photography space.

And I would say if you asked both of them, they would both say that there’s a real importance on having a focus on content that’s very directed towards SEO keywords, as well as working some lifestyle content into your blog. But if I had to categorize, I think it’s pretty safe to say they both agree. Andy focuses more on the SEO targeting and really having that drive strategy, and Anastasia, who I’m chatting with today, focuses more on the lifestyle really having that drive her decisions on what she writes about. And so I thought it’d be interesting to provide both perspectives here. So, yeah, so I’m gonna dive to my discussion with Anastasia on really growing an audience, especially when you’re thinking about using lifestyle content to drive that blog.

Know Your Demographic

So, I love your definition of your audience. You mentioned, I think in the comment you put in the forum, you described them as 25 to 35-your-old hipster, creative people who like the outdoors, cameras and $300 clothing made in the United States. For people that don’t know you well, would you say that pretty much describes you? Are you your demographic, your audience?

Anastasia: Yeah. And I’m guessing a lot of things we’ll talk about today are tied to, you know, why I’m putting the things I’m putting out on my bog, and just in general to the world, and that’s because I am, in many ways, the representation of my audience. And sometimes, we don’t match demographic-wise. There could be people who are a little bit older than me, who are not necessarily…you know, it’s half and half, guys and girls, but mentality-wise and kind of what’s important in life, we’re very much the same. So I feel like the things that I’m sharing, I just really wanted to share them because these are the people who will appreciate that.

Andrew: How much of your traffic or revenue, as close as you can kind of roughly guess, to your store comes from your blog?

Anastasia: It’s interesting. There’s a lot of blog posts that I have, but majority of the revenue…I have two main blog posts. One is driving revenue and one that’s really more of elevating the customer experience with my brand. The moneymaking one, I would say it’s probably, on a monthly basis, it’s pretty popular. I would say it’s maybe 15% to 20% of revenue, if I don’t count wholesale because I run that through a Shopify app, so it’s kinda all bundled together. But yeah, it’s a big chunk. And funny enough, there’s no one in my space who’s optimizing for those keywords who’s writing content and who has products listed on their site, so it was kind of an open niche that I wanted to try and see if, you know, maybe someone will get interested, and in a year it became my best-seller in my Shopify store.

Direct Traffic from the Blog

Andrew: Wow, so 15% to 20% from just one blog post. Do you have an idea, or even roughly across all of your different blog posts, and maybe it’s even, you know, people coming from a less popular one but they end up buying eventually, what percentage of your domain’s traffic and/or sales, if you can guess as well, comes from traffic that is generated from, you know, people landing on blog posts that you have on your site?

Anastasia: I’d say traffic-wise, probably 85% is coming through the blog and then they run around and see what they like. A lot of people are coming because of referrals. People just rave about the pins and patches they got from me. And you know, friends ask them, “Where did you get that?” and they’re happy to share, so a lot of referrals. Some social media, not as much as it was before but I’m not as aggressive as I used to be with social media. But yeah, a blog is a big chunk and a lot of blog posts I’m writing right now are more experiential, not necessarily tied to the products in the store, which is something I need to, you know, work more on. But I wanted it to be more about the culture, about the other patches, about national parks, about getting outdoors, about helping readers.

Even if you’re just looking how to apply a patch from wherever you bought it from, it’s just helpful information with the links to, you know, contact cements to a video, like what happens if you mess up, how do you fix that, what’s the process, what do I recommend? And so, a lot of these things are pretty popular. One of the videos I produced that was part of my, you know, kind of post-purchase flow and something that really helped me with Amazon reviews was this video of how to glue on, iron on, and sew on your patches. And so, right now, it’s starting to get traction through YouTube. So I’m seeing a lot of referrals coming from YouTube, and I’m sure as I get more into video and YouTube vlogging, those numbers will get picked up.

Anastasia’s Approach to Content

Andrew: What’s your philosophy on how you write content? I talked with Andy Hayes on the podcast, and talking about blogging in kind of a similar vein, and his approach was very…he definitely emphasized the importance of having things that weren’t just purely written from an SEO standpoint. But if I had to summarize, the strategy was very much focused on SEO foundation. And from my research on you and what you’ve said, it sounds like your blog is much more…you still think about SEO to some degree.

But you probably are more directed by things that you’re interested to write about or even more importantly, things that you think will resonate with your readers, lifestyle pieces, things like that. How do you think about that? Like, are you glad you’ve gone that route, you know, two or three years down the road? Obviously, it’s been successful to a large extent given the popularity of the blog and how much traffic you get, but how do you think about those two? Because those seem like two very different ways to have a strategy behind the blog.

Anastasia: When I was still in college and I was studying entrepreneurship, I had this one really interesting class. We came in on the first day and our professor for that class said, “Okay, so guys, at the end of this class, basically, the whole assignment for the whole semester is you find an SEO term, we walk you through it daily, you know, 9, 10-minute video of what you need to do that day. If you do everything, you’ll be successful. You’ll rank on the first page of Google. But at the end of the class, you need to sell your domain on a domain auction site and you have to make a hundred dollar profit. If you do that, you get an A. If you don’t, sorry, you don’t pass.” That was kind of the…and that was so interesting, and literally everyday, it was really cool.

I was really into this kind of passive exercising. So there used to be these Slendertone exercise belts, you just put it on and they kinda work your abs, and supposedly, you get your six-pack, I guess quickly, I don’t know. It never really worked for me, but I built this website around exercise belts and I wrote content and, you know, I back-linked articles here and there and it was just really interesting. And I did end up passing the class, but I was just so impressed with the power of SEO and learned my, you know, first skills with Market Samurai and Google Keywords, and now it’s way more advanced than what it used to be. It was really interesting.

Now, I do a lot of research on things that people search for, but at the same time, a lot of my transactions, a lot of my kind of direct…you know, people come in and they purchase right away, happens on Amazon. On Amazon, the best thing you can do is you can do your branded content, so enhanced brand content, quality images, quality descriptions, and then just draw in ad campaigns, headline searches, product searches, all that stuff. So, there, I can’t really pump that much content that I’m interested in but on my site, it’s a little bit different.

A lot of people who bought from me originally, three years ago, they’re still with me today. I have focus groups. These guys, I have people who I sent drafts of designs to, so they’re my kind of go-to field test, “Hey, we don’t like this. This looks confusing. I’m not sure what you meant here.” So I have all these guys, I have one buyer from Greece. Every time I put something new out, he buys one of each thing that I have. And a couple years ago, I wrote holiday notes for everybody. I packed, I created a custom pin, it had on the back, it said, “Token of appreciation.” And it was gift-wrapped with a custom message I typed up on a vintage typing machine. It was this whole hipster thing.

And I shipped it out to 98 customers for that year. It was my first year in business and I said, “Thanks to everyone who bought.” I think the purchase was either 100 bucks or over and multiple purchases, and kind of really people who are engaged with me on social and email. And so, even today, I know pretty much most of my engaged customers by name and we have email, you know, conversations going, you know, chain that’s going to be 10 emails deep just chatting about things, and it’s pretty exciting.

Not All Content Is About Making a Sale

Andrew: So yes, kind of your thought process behind that, if you really wanted to focus on the SEO side of things, you can do that through driving traffic and/or paying for traffic to Amazon, that’s a much more efficient way to do it. Is it fair to say you look at your blog, obviously, you get some traffic as well, but you don’t look at it as much as the primary way to drive traffic as more as a way to brand yourself, a way to build rapport and trust and repeat purchases with your already existing core group of customers?

Anastasia: Yeah, absolutely. I can’t really have every single email be, “Hey, I have a sale,” or “Hey, here’s a new product launch.” I do want to have a little bit of kind of this in between. I don’t wanna go dark but I don’t wanna also just send them something that’s not meaningful, so. And I have some stuff I want to share because these are the guys who will not think that I’m weird and, you know, I put these, you know, trip maps that I’ve done and images for each cool stop. They’ll think this is pretty amazing and they’ll message me back and say, “Hey, do you have any more of those coming up?” So, it’s more of those building one-on-one kind of not so much just getting a lot of people onto the site with a huge bombs-trade, but having people who will come back and who don’t need a reminder to go to the site.

They’ll think of me every, you know, couple months and they’ll come back and look what’s new around. So, it’s not so much SEO, it’s a lot more brand-building and something that I can put out on YouTube and through Facebook ads. So my idea is not to put ads saying, “Hey, shop on this store.” It’s more like, “Hey, here’s a cool piece of content.” And then at the end of this piece of content, I do want to put them in my ecosystem where they’re engaging on social, through email, just shopping around what’s on the site. And then, I can have, you know, multiple touch points and at the end I’ll say, “Do you wanna buy something?”

Blog Posts for Inspiration

Andrew: There are a couple of cool posts that if you’re listening or reading the transcript, check these out. I found them really interesting and they’re a great example of what she’s talking about right now, “The Great Western Road Trip,” very cool, ties of course into your adventure, travel, you know, kind of the whole personality behind your store, so we’ll link up to that. And then also, “The Deep House Playlist.” I love that. It’s some of your favorite electronic and kind of just music in general, but I’ve spent a lot of time listening to that when I was working. It Really good, strong beat, EDM kinda stuff that is excellent, so we’ll link up to those if you’re kinda wanting to see some good examples of the kind of content we’re talking about here.

I’m guessing you probably write 100% of your content just given how personal your brand is, your relationship with your customers, and how tightly it ties in kind of your passions and your skills. Have you ever considered outsourcing any of your writing or do you think that would kill what makes your blog and your content special?

Anastasia: I’m probably gonna reveal this giant secret right now, but I don’t write every single post I put up.

Andrew: Oh, perfect.

Paying a Premium for Good Content

Anastasia: I do write everything from my photo side of things because there’s no one who will have that kind of opinion that I can, you know, just my personal point-of-view. And also, with that side, I definitely…it’s really more personal. On the flip side, on my store blog, a lot of the things I’m doing now are the things that interest me, but I just don’t have enough time to sit down and do all the proper research. So what I ended up doing, I hired four or five Upwork freelancers. I gave them test assignments. I made a really, really detailed Trello board with, I mean, I don’t know how much I wrote, maybe 20 pages on how I started the store, why I started the store, who are my customers, where they shop, how much a year they buy, why do they buy what they buy, what are they interested in? Kind of this full explanation.

Why are we doing this blog? Who’s gonna read it? Why are they gonna read it? What’s the purpose? So, these Upwork freelancers had a pretty clear idea of what they’re supposed to do. And then for each topic, I would make a bullet list of everything that they’re supposed to write about with links, with different things I want them to mention. So, I did a lot of prep work but actual research and writing up of the stuff now happens through my main…I ended up hiring one guy as the main guy, and he…literally every Monday I wake up, and there’s a post from my man in Australia from Upwork. Literally, most of the time I have no comments, no edits, it’s just purely exactly what I want in the same language that I am expecting to get, and he’s just amazing.

Andrew: Roughly, how much do you pay him for an article and how long is it?

Anastasia: So, with him, I pay him $45 an hour. And most of the blog posts take four, five hours. So, normally, it would be $160, $200 bucks, which I know for a lot of people would be like, “Well, I’m paying 30, you know, 70 bucks.” I don’t mind. Sure. I’ve hired some people who were that cheap for me but the quality of content, the same feel that I want to, you know, pass along to my readers kinda make it almost like you can’t tell that’s not me writing. I do go back eventually and then I add some personal notes to the beginning, the ending, spice up some things in the middle if I really feel like it. But most of the time, for 200 bucks, I get a finished piece that I can put up online and I do have another virtual assistant that then loads up the blog post to the Shopify blog.

Writers That Represent Your Brand

Andrew: That’s impressive. I am surprised that you’d tell me that. It’s really cool that you’re able to…it sounds like you had to go through a lot of people and you still look over it and vet it and you do kind of the finishing touches on it, but it’s cool that you’re able to have someone on the team that can at least write in the voice and the style that you like that matches with your brand. That’s pretty cool you were able to find that.

Anastasia: Yeah, yeah, he’s pretty amazing. He’s this curly, blond hair kind of Australian surfer guy who’s also interested in all the things I’m interested in. So, I found kind of a match on the other side of the world. Yeah, he’s amazing.

Content That People Want to Read

Andrew: How important do you think that is? Because that’s something that Andy mentioned, the owner I talked to you earlier about blogging, and he said the same thing, that they only hire people that really enjoy their core product and offering, which is tea. Do you think that’s crucial, like, do you think if going forward, if he disappeared, how important would it be to find someone else that was in that same kind of demographic?

Anastasia: I think the biggest problem with content right now is everyone’s producing content, but majority of it is not worth the read, not worth the time to even look at it. And so, a lot of the other blog posts that I got from other freelancers were you’re reading two pages, but you got zero information out of it, like there’s nothing new that you read. Literally every sentence is just a repeat of itself in another, you know, rephrase of itself. And I thought, well, what am I supposed to do? People will go to my blog post, they’ll see all this and they will not go out, they won’t have anything to leave with. So my idea was to have something meaningful. He’s a big asset for me. I’m not sure, you know, how quickly I could find someone else to replace him. I’m not opposed to spending money on areas that will help my business grow and where people are really aligned with what the brand stands for and what I appreciate in someone’s work ethic.

The Single Domain Blog

Andrew: I know you’re on Shopify and you use Shopify’s built-in blogging platform, and I feel like there’s kind of been this hard compromise that people have had to make. Assuming kind of the premise is that you want to be on Shopify. You either have to be on Shopify…if you are on that platform and you wanna blog, you either have to use your built-in blogging system platform to keep it on the same domain, or if you wanna use WordPress, which is probably, I guess it’s pretty safe to say, the most popular, most loved blogging platform, you have to put that blog on a sub-domain which isn’t end of the world, but potentially, you might lose a little bit of SEO benefits from that. And so, you have chosen in that kind of decision to use Shopify’s built-in blogging platform. What are your thoughts on it? Has it been a big problem? Do you think that issue is overblown? What are your thoughts?

Anastasia: It’s interesting. I did some evaluation. You know, should I go with WordPress? I already have one site on WordPress. Should I not? And one of the things that really pushed me away from WordPress, one is I did want to have it on a single domain. Second, I didn’t want to have this whole another theme setup and matching so people know they’re still in the same site or, you know, do I pay someone to customize a theme for me? Then I need to set up all the plugins. It’s just a lot of set up that I didn’t want to do initially and I just wanted to put something out and see does this even get any traction before I invested, you know, a lot more time and money.

And so, I started seeing results pretty much right away with Shopify. I get it, it’s not as robust as most of us will want it to be, but at the same time, okay, there’s 20 plugins, how many of them do you actually really need on your site? Like, what is the main thing? Is it commenting, is it an email pop-up? There’s a lot of things that you can solve with other apps in Shopify store. If it’s, you know, how easy it is to upload a post, meaning like images and sizing and text formatting, how about just get, you know, a VA, explain the process, explain what needs to be done, and for five bucks, someone will do that for you.

I didn’t really see a big, you know, pain point for this and the end result is I’m really happy with this kind of simplified approach. Because you upload one image, sure, you know, how many people will actually use the slider on the site? You basically ask them to do one thing at a time. They read, they scroll, they look at the images. And so, the simple approach really helps me, and I think it helps the readers too. They’re not confused with too many flashing things. It’s just a straight-up page, it’s almost like, you know, looking at a book with some images, which I really like. So, for me, this clean and just uncongested view is really part of the experience I want to deliver.

The Lightning Round!

Andrew: The benefits and the simplicity of it. Yeah, that makes sense. I wanna do a quick lightening round with you like we do for most of the guests on the show, so feel free to just answer, of course, just rapid fire here. But if you had to identify the number one thing you’re trying to optimize your life for right now, what would that be?

Anastasia: Probably just work-life balance, if there’s anything like that for entrepreneurs. One thing I’m looking forward to is figuring out how to relax again. I want to have a little bit of time where I don’t feel guilty, where I’m just, you know, chilling, listening to an audio book or being on the beach. I wanna be okay with my free time and doing whatever, whether it’s shopping or just anything.

Andrew: Who’s someone you strongly disagree with?

Anastasia: Oh, that’s getting political. You probably know who I’m talking about, but yeah, I don’t really wanna…it’s just such a sore topic for everyone.

Andrew: I’ve had a rash of those this week on another recording. How much money is enough? What would be your number in the bank where you would say, “This is good. I could be good with this?”

Anastasia: You know, this is interesting. I don’t have an exact number. I do have a number of how much, you know, I wanna make. I do want to make 15K off of photo prints. I do wanna make, you know, 30K consistently through the store. I do want to have additional revenue through other channels. But really, once you become an influencer, at least in the current state, pretty much anything I do want to have, you know, like physical, a bag or a camera or accessories, I can go and find a way to get it for free. That’s the benefit of being an influencer. So, I’m not really pressed. Like, look at Casey Naistat, I don’t know, he probably can get anything for free. So, maybe once that goes away, I have a mind shift, but right now, I’m just really happy with what I have. I’m happy. It’s more of kind of a quest arcade to figure out what’s next, what I wanna do, how to bring more smiles to my customers and optimize the business and make sure everything is running smooth.

Andrew: What’s the worst investment you’ve made in the last 10 years?

Anastasia: Oh, I paid someone to build me a custom motorcycle and this guy bailed, and he had a bunch of lawsuits against him. So he never delivered the bike, he disappeared. No one could get any money out of him and all of this I could have prevented if I only looked at the Yelp reviews. So yeah, 4,500 bucks gone.

Andrew: How brutal. I’m sorry. Maybe this will cheer you up a little bit. What’s the best investment outside of your business that you’ve made in the last 10 years?

Anastasia: Tough. You know, it’s funny, but I would say it’s probably my American-made $300 clothing. I’m really into Red Wings and Danner boots and Chippewa and my Barbour jackets and just American-made stuff. So, that’s something I wanna keep for decades. Once I buy, you know, a pair of boots, at this point, I don’t know, I probably don’t need anymore ever.

Andrew: What were those names again? The two or three names that you mentioned, the companies?

Anastasia: All right. So, I’ll do some hipster training with you. So, the brands you need to know, there’s Tanner Goods, there’s Red Wing, Chippewa, Filson, L.C. King, they’re in Nashville. Let’s see, what else, Barbour, these guys have been making wax jackets in England for like forever. Who else? Danner, they make super awesome outdoor boots and they are the supplier for the army. Luchesse, you probably know Luchesse, they make awesome cowboy and just leather boots. Really cool brand, Allen Edmonds, amazing men’s shoes, just awesome, actually made here nearby where I am right now in Wisconsin. Let’s see. I think for the most part, that’s it. But just imagine anything canvas, wax, leather, American-made, lasting forever and the brand has been around 100 years.

Andrew: I love it. Hipster training, it cracks me up. So, what was the first CD you ever owned?

Anastasia: I don’t know, actually. I have a couple. I do remember the first really impressive audiotape. This is way before the…I wasn’t a cool kid. I didn’t really have all the toys. So, I had this Sony, this cassette player and I had this Craig David “Born To Do It” CD, which probably is still one of the best sounding CD, just well-produced records still out today. Amazing, amazing tracks, just a lot of work put in, not just by the singer but the whole crew that put together that album.

Andrew: Nice. And then usually I don’t ask people this. This isn’t part of my standard question repertoire, but we were talking beforehand and you were talking about how you wrote down all the important physical objects in your life and made a list of them, the things that are, you know, really valuable to you. So, assume that there is a house fire, given that you’ve given this already a lot of thought and you could only take two of those things on your list, you know, and save those, those would be the only two things you could…you’d have to start over but you could get those two things, what would those two things be?

Anastasia: You know, for me, it’s pretty simple. Putting aside all the clothing…and I have a list of all the clothing, like my three pairs of boots and my jackets and all that stuff. So assuming I can’t take that, two things, one, my camera, my main camera, and two, my box hard drives where I have all of my photos and content. I do have cloud backups but those would be the two things I take.

Andrew: Love it. Anastasia, this has been fantastic. It’s so cool to hear your thoughts on blogging and the way you’ve been working that. And if you haven’t checked out her store, asildastore.com, apart from the really interesting content she writes on the blog, it has some very cool patches and things. I rock one on my daily bag. My daughter has one, the little van. We’ve got a bunch of them throughout all sorts of stuff in our home. Yeah, thank you so much for coming on and congrats on building what’s a very, very cool brand.

Anastasia: Thank you, thanks for having me. I appreciate it.

Andrew: Hey guys. Andrew here again, and wanted to say a couple quick things in closing here. I have not built out a real vibrant blog for an e-commerce property per se from my past stores. Blogging was never a major component of what we did. But I have been blogging in ecommercefuel.com for, you know, oh man, what do we got, over five years now, and the blog was really the resource and the tool that allowed me to do everything I have done since then, including, you know, launching the private community, you know, running the podcast, selling a course at one point, it all spun from that blog. So I wanted to share a few things from my experience that hopefully could be helpful.

First thing is, one, build a portfolio of four to five really solid blog posts before you start approaching people. Nothing is worse than when somebody approaches you and tries to pitch you on, you know, just writing for them or connecting or mentioning their blog and there’s nothing there or the post there are really thin. So, I mean, spend…for myself, I spend, I think, a solid week doing nothing but writing those posts 40 hours before I even started talking to people.

Secondly, that first 6 to 12 months, try to give a tremendous amount away, and worry less about the revenue you’re seeing and worry more about building a reputation and an audience and a list. For my first 6 to 12 months, I didn’t charge, I didn’t even have a product for sale with the exception of one tiny little thing that I didn’t push at all for the first 12 months. It was 98% focused on creating all those things, just high-quality content, building the SEO juice, promoting it, building relationships. And one of the lead magnets I had was actually, probably a 40 or 50-page e-book that I also spent…I literally sequestered myself in a mountain cabin in Arizona and did nothing. I wrote it for two weeks straight. It had a hundred hours into it and it was something I could’ve sold. I used that and gave that away exclusively as a way to build my credibility, even more importantly, build my list because nobody knew who I was and very few people of today even know who I am, but even fewer then knew who I was.

And so, have that mindset of 6 to 12 months of really trying to focus on not sales, but focus on attention and your list and building reputation. Focus on building reputations, or rather relationships, in your space with the giants of the space versus trying to take a shotgun approach. When I started, I identified Shopify as someone I really wanted to have a writing relationship with, and I’ll link up to a post I wrote called “The Stocker’s Guide to Guest Posting.” And it outlines the entire process I went through to convince them to let me write for their blog because it was a very methodical process I followed.

And that relationship, writing for them, oh, probably only half a dozen times, I mean, it’s been probably the largest driving force in building up my list, you know, the traffic to the site, you know, getting on the map for e-commerce. I think at some point, you know, links from them were responsible for, you know, 30% to 40% of my subscribers to my list. And that doesn’t even count the increased juice I got from the back-links. So, find the influencers in the space and really focus on building fewer but better relationships.

Try to be gutsy, and if you can, pull some PR stunts. I’d say probably my most popular widely read article to date is my article on reverse auction of selling Trollingmotors.net where I had a totally public sale with that storm. If you’ve been following me for a while, you know, you’ve heard about this before, but the traction I got with that and the people that that put me on the radar of, just with how that article blew up, it blew up on Hacker News and some other places, was just, it was crazy. And most of it came from the fact that I did something that just hadn’t been done before and it was a little scary and a little…you know, there was some risk involved there. So, that’s gonna vary for whatever niche you’re in, whatever you’re doing, but the gutsier you can be and the more likely something is to massively flop perhaps, especially if it’s embarrassing, that’s probably a good sign that it could be a great, great article and could get you some great PR.

Once you have a baseline of…you’ve got a little bit of domain authority either because you’ve built that up through your blog or maybe you’ve got your blog as attached to an existing e-commerce store that has great domain authority already, so you can rank fairly well based on the merits of that domain, write less, write better and promote more. I think it’s really true that the longer your stuff, or at least the better your stuff, however that looks, sometimes it’s longer, sometimes it’s just more involved, don’t write as much…at least for me, I’ll speak for what’s worked for me…write fewer things and write better things and promote them more. That’s been big for me.

And then finally, I think you do need a little bit, we can have these last two episodes talking about the SEO approach versus more of a lifestyle approach to content, and I think you need both. I’m an optimizer at heart, so every time I put out a blog post or podcast, I’m trying to find that perfect keyword and also craft a headline that just people can’t resist clicking, but at the end of the day, it’s really hard to make every piece do that. So, have some posts, if you can do it, it comes to mind, you know, for a post, awesome. But just kinda come to terms with the fact that some of your posts will be great SEO posts and some will be fantastic lifestyle posts that maybe are better at bringing your audience together and building that loyalty. But it’s really hard to do both and nail them both every time for every piece of content you write. So, yeah, that’s my experience blogging. I hope that’s helpful and thanks so much for following us through on the blog series.

Want to connect with and learn from other proven ecommerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight-knit, embedded group for storeowners with at least a quarter million dollars in annual sales. You can learn more and apply for membership at ecommercefuel.com. Thanks so much for listening and I’m looking forward to seeing you again next time.

Blogging is hard. I speak with hundreds of store owners every year and few – if any – mention blogging as a meaningful part of their strategy. But if you get it right it can be amazingly powerful. Nail it and you’ve built yourself an ongoing source of free traffic to power your store and [...]

Hey, guys, it’s Andrew here and welcome the “eCommerceFuel” podcast. Thanks so much for tuning in with me today. And today, I’m day kicking off a two-part series, I feel like PBS or something here, on blogging, of all things. We actually had somebody post in the private forum recently asking about if anyone was really killing it with blogging. And I wasn’t expecting to see anything blow up really.

I talk to a lot of store owners. Very few of them, I would say, see a really meaningful percentage of their sales and traffic come from blogging. And in the past, too, there have been threads that we have in the community where people say, “What big eCommerce companies are really doing well with blogging?” And there’s a couple that were mentioned, but by and large, it was a fairly quiet discussion. And so that was really interesting.

A couple people chimed in and talked about their experience and their success blogging. One of those, you know, I guess, today on the show, Andy Hayes from plumdeluxe.com generates almost two-thirds of his sales from blogging, which just blew me away. And so I wanted to get him on the show to really talk about how he does that and the strategies that he employs and how long it’s taken him. So, we talked about all of those things, his thoughts on finding really good writers, about getting people to opt-in for that, his strategy on in terms of keyword research and SEO. He would definitely, as you’ll hear, will probably advocate a balanced approach or at least having some blogging content that does more lifestyle, that’s not purely mercenary in terms of just targeting keywords.

But I would say, if I had to summarize his standpoint, he’s very much focused on that keyword approach and it’s worked incredibly well for him. So, part of the cool part about this two-part series is we’ll be talking about his experience and his approach today heavily weighted on very substantial keyword background and SEO background. And next week, I’m gonna follow up with another episode that’s almost a reverse of that, maybe thinking about SEO a little but focusing much more on the content on lifestyle pieces on just things that are of interest to the readership with less of a priority on really nailing that SEO and how that’s going. So, give you a couple perspectives there. So, I’m gonna stop rambling and get into my discussion today with Andy on blogging.

Major Sales Through A Blog

Andy, so, give me a sense of what percentage of your site’s traffic and sales that you can either tell or estimate are coming through as a direct result of the blog?

Andy: Well, I had a feeling you were gonna ask me this. So, I actually looked it up. I would have just said a lot.

Andrew: Did that have anything to do with the fact that I sent you the question list ahead of time?

Andy: I would have just said a lot, which people would be like, “Yeah, whatever.” You know, like, they’d stop listening. And these are actual and this is the past year. I feel, like, for this whole conversation that we’re having, things are changing, you know, as the years evolve. So, keep that into mind. I would say percentage of traffic for us from the blog right now is 75%.

Andrew: Wow.

Andy: Percentage of sales driven through blog traffic, 62%.

How Long It Took To Grow

Andrew: That’s amazing. And how long did it take to get there? So, maybe, you know, how many years? How many articles per month are you writing? How big is your overall library of archived content?

Andy: We have 10 years worth of archive. And before you go, “Holy crap. Like, I can never manage that.” Keep in mind that some of the older stuff is terrible, it’s not relevant or it drives irrelevant traffic, so, you know, because the business has changed over the years. So, just keeping that in mind, I think really…because Google is the person who’s going to benefit you the most from a blogging, kind of, marketing platform. And you really need at least six months to start seeing results from that. So, I would say at least a year for that. That could be, you know, a lot faster if you have other existing channels that you can put content into. Like, if you have a ravenous Facebook group or you have a really popular email newsletter, a blog can really elevate that.

And, of course, for us, a lot of our sales do come from putting content into an email newsletter. But I would say at least six months to a year to get that started. This is not something where you can put it out there and nothing happens and you say, “Man, you know that Andy guy…like, that advice was crap.” No, you definitely need to give it some time and really, kind of, experiment with different things to see what’s gonna work for your customer.

Andy’s Bullish and Bearish Stance on the Future of Blogs

Andrew: You kind of alluded to times are changing a little bit. Things aren’t what they once were. And all of us are pretty familiar with Google, the ever-diminishing size of the organic search results pages. I mean, it’s obviously worked super well for you. What are your thoughts on all that? Are you as excited about blogging? Are you seeing the traffic diminish? I mean, you’re still getting a ton, of course, but have you seen that drop off a little bit? Where do you think we are? And how bullish or bearish are you on blogging, in general, going forward?

Andy: It’s definitely more difficult. Like, if you have nothing and you’re starting from scratch, it’s gonna be a lot more difficult than it was 5 or 10 years ago. I think there’s still a lot of opportunity in the long tailed keywords. So, for those of you who are not familiar with that term, a short tail keyword would be, like, “eCommerce podcast,” whereas a long tail might be something like “eCommerce podcast on blogging and SEO keyword research.” Something, like, ridiculously long.

Now, the long tail, you know, a few people are searching for them but there’s less competition. And I also think for eCommerce businesses, a lot of those queries are very specific. And if you can pair them up with a specific product, there’s a lot of opportunity there. I think the big challenge for bloggers is the style of content that people are preferring these days is changing. And a lot of people are moving to podcasts and people are having a lot of success with that. So, that’s kind of something you have to contend with. And this is not the time or place to debate, you know, whether you should have a podcast or a blog. You know, it’s like apples and oranges. And maybe you should have both.

But I definitely think that that’s something to think about when you’re thinking about blogging content for your business. How do you compete with that? How do you put things out that are more suited for a written and photographic format than, you know, an MP3 format, for example?

Creating a Blog Strategy

Andrew: Yeah. Keyword research, you mentioned, of course, the long tail and that’s where you see a lot of opportunity. How much of your strategy is focused around starting with a keyword in mind and writing an article for that versus saying, “Hey, we should…this sounds like something interesting. I’m gonna write an article and then I’ll go find a keyword to match that.” Do you have a strong preference one way or another?

Andy: We do both. But I have to say, if you want to be successful at this, you have to be obsessed with keywords. You have to be obsessed. And so we do both and we really try to make sure that 90% of what we publish is optimized for a specific keyword. I mean, I would say 100 but, you know, once in a while there’s things that we do that are not specific to a keyword.

Our strategy right now, because we publish three times a week, Monday, Wednesday, Friday, that’s probably what we’re gonna stick to for the time being. And it’s usually like a recipe, something about entertaining or mindfulness. And then we started doing, a couple years ago, just on Friday’s, it’s like an SEO post. It is literally an SEO post. Like, title says, like, “What to mix with green tea?” You know, “What’s the difference between English breakfasts and Irish breakfasts?” Like, they are literally keywords.

And the thing is is I put them in our newsletter and they’re often the most popular item. So, you know, it’s like, “They’re driving the most sales, they’re really popular. Yeah, we should be doing these, like, all the time.” But the thing is if the blog was only posts that all had these, like, really, kind of, machine language sounding titles, that wouldn’t feel that engaging. Part of what really gets people, you know, sucked into our website for, like, 10 minutes is the fact that there are these,like mouth-watering photos of food and beautiful tablescapes and all these different, interesting ideas for how they can, like, spend their time with friends and family. And also, intermixed, are these things that are super keyword focused. So, you gotta have a balance of it. I don’t think you can be too soft on just, like, fluffy topics that really people aren’t exactly looking for. But at the same time, you know, really getting those keywords in there.

Do Your Keyword Research

Andrew: What’s your approach for keyword research, and maybe, a good threshold? On the long tail, you mentioned that’s where there’s a lot of opportunity. Maybe, a two-part question if I can throw a two-parter at you. The first one, what kind of tool do you use to look for this stuff? And secondly, what kind of threshold do you have? And do you find that those tools, a lot of times for those long-tailed keywords, underreport things? I’ll look at long-tailed keywords a whole lot of times and they’ll be spot on, exactly for, you know, I wanted to have an article, thinking about writing our podcast I’m thinking about doing, but they’ll get 10 searches a month. Or a lot of times, there’s, you know, zero reported search data. And I wonder if how accurate that is. I wonder if sometimes if it’s, you know, under-reported. So, what tools are you using and do you trust the data that they give you in terms of the volume on that long tail?

Andy: All right. Well, I think none of us trust Google 100%. I think that would be just silly, silly. So, I don’t usually go after a keyword unless it says in the Adwords keyword tool over 30. So, like, one a day, right? I don’t do anything less than that, just because I don’t trust them, right? You know, what if it was 20? What is the keyword? Because if it’s, like, a perfect fit for something that you offer or, like, maybe it’s this versus that and you actually sell both items, it’s like a perfect fit, then, yeah, like, go for it if it’s 25. It’s kind of a, you know, requires some thinking to it.

I have used a lot of the different tools out there in the past. And if you’re an eCommerceFuel member, not a paid promotion, like, there’s tons of coupons for these things in the forum. But I’ve used a lot of them in the past and find I always just come back to Adwords tool itself. And I feel like if you spend enough time in there looking for things, you’ll start to spot them. You’ll start to understand how to use the filters and, you know, sorting, you know, the table to find things more quickly. The other tools, I think, they just end up sending you on, you know, goose chases. I’d rather just get, you know, the data directly from Google and decide how much I trust it.

Building Up a Library

Andrew: How do you build up a great content library of things to write from? Keyword research, of course, is gonna be, probably, the biggest part of that in terms of, you know, inspiration, things that are coming up in the content calendar. What other ways do you get ideas for writing content?

Andy: Customer service questions. What do people ask you about? What do people, you know, like, go look at the actual emails, like, wherever they come in. You know, like, we have a generic mailbox that they hide in. And you know, so, looking at what people actually ask. How do they actually say it? You know, like, if they’re asking for something and you actually call it something else, it’s like, “What is that all about?” So, customers. Also asking customers.

I try, every so often, to ask people, like, what are they interested in, what they’re looking for. You could do that depending on when you’re hearing this episode. But, like, at the end of the year, you know, you kinda do the survey or, you know, help us plan the new year. Just ask people what they think because people, you know, always want to give opinions, especially about something kinda light like that.

Like, you know, “Hey, you know, we’re gonna blog a little more next year. What are you interested in?” I also like to read magazines and, like, other niches, not my niche. Because I think there’s very, oftentimes, you’ll see something that’s, like, really engaging for you or maybe not specifically for you but you think like, “Oh, that’s an interesting topic.” What if you changed it to your product area? Like, would it still work? I always find, kind of, interesting things that way.

A Team of Writers

Andrew: I wanna move in a little bit into getting the content up and running, actually writing it and producing it. How much do you write yourself versus outsourcing? And if you do outsource, you know, have you had good luck with it and how do you find those writers to do a great job?

Andy: I do not write much anymore. Probably, once a month because of time. It’s not the best use of my time. I try to because I, you know, as, kind of, the founder of a small business, people, you know, want to support us. They want to hear from me. But I think, you know, like, I was just saying, this interesting podcast topic would be a better use of my time than doing something about, you know, Earl Grey shortbread, which we have, like, three people who are very qualified and have much more beautiful kitchens to do that. So, it’s not the best use of my time. But we have very good luck.

Everything is outsourced to writers. And one of them is a customer who turned into a writer, and then two of the others are just people that we had built relationships with over the years. And now we just always work with the same people. I really recommend that approach, finding someone that you like, get them up on your style and the way you want things done and then plan out, you know, your calendar from there. I think that’s the best way to go.

I have not been super impressed with what I’ve seen from people using those sites where you just hire, like, you know, writers from a big bucket of…their hanging out in the cloud or whatever. That might work for some people, but I just think for so many people listening to this who have businesses that they’re really thoughtful about or they have products that they, obviously, have some attachment to. Otherwise, why are you selling this random thing? It makes more sense to develop a relationship with someone that you can just count on to understand your style and what’s important to you and then get them, you know, booked regularly and pay them. You know, we pay all of our writers.

People can submit ideas to us to write and you can see, on our website, how much we pay. We pay new people $30 an article. People who have written for us for years, we pay a lot more than that. Pay them a flat fee, we don’t pay them per word. I don’t get into that game. That’s old school to me. Just pay flat fee. Pay people for a result, which would be, you know, content written to the length that you said, the kind of photos that you asked for, the links and product references that you want.

Paying for Quality Content

Andrew: So, how much would you pay for a really good…you mentioned $30 for someone beginning, which is definitely, I would guess, on the low side. For someone who, let’s say someone, you’ve developed a great rapport with someone, they’re reliable, they write well, they know key really well because that’s obviously something important to you. What is a reasonable price to pay someone for, let’s say, just 1,000 word, well-written article for someone who has some industry background that you could kind of have an on-going relationship and give them regular work with?

Andy: At least 100 bucks plus free stuff.

Andrew: Got you. Okay. Interesting.

Andy: Yeah. I mean, for us, you know, people hear that and they think, “Well, that seems a little low,” or, “that seems a little high.” You know, depends in your industry. For me, where I am with our business and the people that we work with, you know, we have figured out what the value is and how we can make sure people feel appreciated. Most of our writers have worked with us for years, years and years. And we pay them more when we can and we send them free stuff whenever we can, too.

So, just figure out for you, like, what makes the most sense and communicate that. You know, don’t…one thing I do see people do that I don’t want you to do is like say, “Okay, we’re gonna pay you, like, you know, 20 bucks and if we like your work, we’ll pay you more.” Don’t just say that. Say, like, what you actually intend and what the criteria are. If you don’t actually intend on paying people more, then don’t say that stuff. So, just a little, like, kinda don’t do that. You know, writers have a tough life. And I think there’s a lot of websites that take advantage of them. So, like, be a cool person. Be a nice human. Tell them what you can afford. If they want to do it, super. If not, find someone else.

Headlines Are Headaches

Andrew: What about headlines? Headlines, in my experience, are the absolute hardest part of writing most podcasts or posts. I usually skip them and come back to them because I don’t want to do them. And I know, a lot of times with your headlines, some of the stuff you do is very SEO, just…you alluded to earlier, just straight up keywords. But other times, you know, I’m sure you’ve wrestled with this as well, like anyone doing content. Do you have an approach to that? Like, who writes that? Do you guys write it? Does the author write it? Do you have a swipe file? How much of the time do you try to write catchy headlines versus just writing straightforward, descriptive headlines that, maybe, aren’t quite as link baity. What’s your approach there?

Andy: Well, I think at the beginning, we let the writers drive. And over the years, we’ve been more assertive in what we want for those. That is one of the hardest things, I do agree. The thing I would say, as my piece of advice, is clarity is king. The headline needs to be very clear about what’s inside. So, I have a great example for you that just came to mind. So, we used to publish things like Earl Grey shortbread. It’s much more clear if it said, “Earl Grey shortbread recipe,” isn’t it, right? It seems like kind of a silly little detail but at the end it says recipe and you’re like, “Oh, I know exactly what I’m gonna get when I click on that.”

So, think of ways to make your headline very clear, have a lot of clarity. That’s my specific tip. You know, like, there’s so many blog posts out there with, like, how long it should be and should it start with how, what, when, where, why? And having verbs in the title, like, all of those things. And they’re true to a certain extent. But I think it comes down to…it’s an individual case for each piece of content and just making sure that you actually do think about it. As opposed to just publishing it and putting something up there. Think about what would be the best headline here.

And for sure, if there are keywords that can be inserted into, said headline, this is a good idea. But you don’t need to go too crazy. Again, and I mentioned it earlier, it’s a balancing act, right? Like, keywords that are stuffed with headlines can get hard to read or feel a little machine-like. But if they don’t have any, sometimes that’s not clear either. So…

A Writer’s Checklist

Andrew: What’s your checklist for when you have an author write a post and before it goes live, what has to be on it both from a, you know, maybe a writing standpoint, a copy standpoint but also from an SEO standpoint or an image standpoint, what are some of those major things that are on every single article that comes out on your blog?

Andy: Well, we have a style guide that reminds people about how we like them to write and who our customer is. That’s kind of an aside point to what you asked, but I think is relevant because we do ask people to, you know, talk in a certain way or write in a certain way. You know, just thinking about, you know, breaking their article up into sections, etcetera.

But for the checklists, we do have one and it is enforced heavily. I should have pulled it up. But the most important things on that, there is a reference and link to a product in every piece required. There is a link to an older article that’s required. You know, like, SEO there, Google likes that. We do ask them to think about the headline. Like, is the headline clear? The images. One of our biggest social outlets is Pinterest, so we do ask them to provide us an image that could be resized for Pinterest, which prefers the…I’m gonna get this wrong, you know, like a tall rectangle. Whereas, kind of on our website design, horizontal, across images display a little better. So, we actually need both. So, it’s kind of a weird, specific thing to us. Do you have the images? Is one of them vertical? Is one of them horizontal? Like, that kind of thing.

If there was a keyword provided, which these days it’s invariable, we give them the instructions on how it should be incorporated. So, it should be incorporated in the beginning and then at least, you know, one or two more times throughout. And if they can get into the headline, super. But it doesn’t have to be. So, I think those are some of the key things.

An Editorial Calendar

Andrew: What about with, you know, you get the articles, two or three per week going out. Do you guys do a long-term editorial calendar? And if so, why is it important and what should somebody think about if they wanna set one of these up, in terms of things that are important to get right to make it successful.

Andy: Well, I would say, Andrew, if people want to do this, they want to be successful, they have to set it up. You cannot be successful with content marketing without an editorial calendar. I do not think it’s possible. And that’s because you really need to plan ahead. Because if you…Let’s take an example, like, if you want to have something like “best e-Commerce Christmas gifts,” that’s a terrible keyword. Don’t use that, people. But maybe for your blog, right? Get people to go into your gift guide, Andrew, on your “eCommerce podcast.”

But best “eCommerce Christmas gifts.” Okay. Well, people are gonna be looking for that towards the end of November. And if you want that to start ranking in Google and also if you have it out, you know, for an email list, it needs to be written no later than, like, the beginning of November so you have time to get it in there and publish it and edit the photos, all that stuff. I mean, someone needs to be writing it in October, which means you need to have thought of it and checked the keyword and actually know what it was in September. So, that’s just a simple example of how working ahead ensures that you are able to maximize your efforts. So, we do editorial calendar. And we kind of have it set up so that it’s just kind of a process we always follow. And so every month, kind of, the same things are happening.

So, right now it’s October. So, next week it’ll be November. And so November, I will be writing down all the keywords and finalizing everything for January, even though there’s already…we have a kind of, you know, dock that has all the floating ideas. But I’ll say, “Okay, these are reality, and this is what’s really happening. This is what I can budget,” etc. And then those get assigned beginning of January. And then the writers are writing them at the end of January, beginning of Feb. And then they come in and they get loaded into WordPress so that they can be published in March.

I think I got those dates…I got the months all wrong. But you get the idea of, like, we work way ahead to give us time to make sure we’ve researched the keywords, we know what is going on during that month and it matches up with our promotions. We give our writers time to deliver the quality that we expect. We give our internal team, because we do all the loading of the content into the website and setting up, you know, photos and the social media promotions and the newsletters all done by someone in the team itself, give them time to do it correctly and properly and have the whole shebang happen in time for the customer thinking about, “Oh, yeah. I do want to read about eCommerce Christmas gifts because I need to be buying those soon.”

Andrew: You say podcasting sounds like a lot of work.

Andy: But actually, maybe it does but it’s a lot less stress and a lot easier if it’s planned out. Because, you know, I know next week, it’s the start of the month so I need to…I have it on my to-do-list. It pops up like, “Got to go finalize that calendar.”

How to Produce and Oversee Tons of Content

Andrew: How long does it take you to do that? Maybe, people can apply their own little…you know, obviously, you’ve been doing this for years. You’re gonna be way more efficient at it than others. But how much time…it sounds like your big role is managing that editorial calendar, the topics, the keywords, delegating those out. Other people writing, other people loading it up, other people promoting on social. But for you, it’s kind of the puppet master in the nicest type of way. How long does it take you every month?

Andy: Yeah. Well, so, we do a team retreat every year. And one of the exercises is we do try to come up with some ideas. And then just when I’m out in the world, like, I make a little note of things that I see and I put them on there. So, I’m always trying to, like, kind of fill the hopper, so to speak, so that when it comes time to sit down and do that, I’m not starting from scratch. I would say I probably spend, maybe 90 minutes. Sometimes it’s a little more, if I have trouble with the keywords.

Know Your Writers’ Strengths

Andrew: And that’s one of the beauties of having, sorry to interrupt, but one of the beauties of having a fixed, kind of, roster of writers that you know well that are in the space. You can leverage their assets and their environments as well for really cool stuff.

Andy: That’s right. That’s right. And we know their strengths, you know, their weaknesses, so to speak. I don’t really feel like they have weaknesses. It’s just like, “Oh, you know this person really excels with recipes they should get mostly that.” And so then, you know, I don’t think it takes very long to assign everything. It takes probably longer to type it all up in Asana, which is what we use to keep track of all this stuff. And then they all come in at a certain time. I do know that our marketing person takes, you know, a few hours to edit and do the photos and upload everything into WordPress and schedule all the social media. So, that’s not, you know, an insignificant undertaking.

It’s batched so that helps a lot, right? Because writers know our expectations, they deliver them in the way that we want. And so just power through them. I author our weekly newsletter. And so I just pull everything up on the blog or if I happen to be doing it a little early that week, I log into WordPress and, you know, get the URLs if they’re not published yet. And that takes me an hour a week. But that also has, like, a marketing promotion and a letter for me.

So, the hours do add up. But back in the beginning, you know, we’re really seeing a lot of results from it. So, we’ve, you know, committed to the investment. And each year, we really look at how to be more efficient and really optimize for the result. So, it’s not like it’s taking less time, you know, some things, maybe, now take more time but we are getting, you know, more sales each week from the things that we post. So, you know, it is an investment.

Writing Then Promoting

Andrew: What’s your strategy for, maybe, moving from content over to promotion? How much do you promote your content after publishing? Do you primarily look at the blog as predominantly an inbound source of leads, it gets indexed as well, it’s obviously well-written but optimized for keywords and so, most, you know, 90% of that is coming from Google? Or do you guys do a pretty strong push in terms of sending it out on email? You mentioned social already, so I think that’s an element. Things like that. How much push versus pull do you have on the blog and how important is that aspect of it?

Andy: Well, I think it’s crucial. I feel like the blog is the reason we can send a newsletter every week that people really want to read. So, it goes into our newsletter. It’s the core of our newsletter, which is the core of all of our marketing is this weekly email that we send. But also, you know, having these, kind of, appealing photos. I mean, anybody who’s been on Instagram for 10-minutes knows that food is super popular on Instagram. So, having, you know, a variety of things, not just this endless array of, like, piles of tea leaves or teacups gets people more interested in following what you’re doing. Because it seems like the way to stand out is to be interesting, to have, you know, something interesting to say or to share.

And so that’s really the driver behind having all these different types of content and the way that we put them together so that, you know, no matter if you’re following us on the Instagram or, you know, you just read the newsletter that, kind of, you’re always looking forward to what we’re gonna say next.

No Paid Traffic

Andrew: Do you ever do any paid promotion, let’s say, Facebook advertising or any kind of paid promotion for your content pieces or do you usually just use your organic channels?

Andy: You’re not paying attention. I always complain about Facebook ads in the eCommerceFuel forum. Facebook law…I just cannot. So, people are wondering what I mean by that. Like, our pay per click all goes directly to, like, a landing page or some sort of product itself. We have dabbled somewhat in Pinterest promoted pins because Pinterest is a…probably our sweetest spot in terms of social. But I still have better results than Pinterest with landing pages. So, I just haven’t. I just haven’t.

And as far as the Google, well, I’m just gonna wait it out. We still are getting plenty of organic traffic, long tail so I’m not gonna pay to promote certain things. Plus, I feel like getting people from articles to products is still kind of a thing that’s changing. And we’ve changed how we do it several times lately and we’re still kind of understanding that. It’s a lot easier to get someone who’s reading content to sign up for a newsletter or some kind of email thing. And then we have…the email, like, we’re magicians at, you know, with the quality of the photography and balancing the promotion. So, no. To answer your question. No, no, no Facebook promo.

How To Get Newsletter Signups

Andrew: Well, you touched on, you know, getting people to sign up for the newsletter. How do you do that? What’s been most effective for you? I’m thinking from an eCommerce perspective, you land on a standard eCommerce homepage, a lot of times you’ll get hit with a pop-up for 10% off. That does not make sense to me as much on a blog page for something like what you’re doing.

How much of your focus is spent on trying to get new subscribers that are just coming to the blog versus just trying to blast or market to the customers you already have? Have you found anything that’s been really…we could probably do a whole article on opt-ins and trying to get people to subscribe, especially kinda in the eCommerce realm, what has worked well for you and is that a big focus of yours?

Andy: It’s for sure a focus. I think it’s crucial to making the whole strategy hang together. It’s changed a lot over the years. So, when I started, you gave away what’s called a lead magnet. So, you give something away to get people’s email address. And it used to be big things. Like, you give them a free eBook or you give them away a course. You know, like, a 10-day course on, you know, eCommerce blah, blah. And I would say, three years ago, we had to, like, pair down because it was like this arms race of the lead magnets. And so then it went to, like, simple things like a free one-page workbook or, “I’ll send you my 10-steps to, you know, making eCommerce business successful.” And now, I feel like it’s, like, even less.

I have seen the best results with eCommerce, specifically, going the minimalist route and just not promising anything. I think our current and most successful opt-in says, “Sign up now to have more hope and encouragement in your inbox each Sunday.” That’s literally it. We’re promising people hope and encouragement. Well, who the hell doesn’t want more of that? We do not do the coupons. I think that’s a crap strategy. I feel like that’s lazy. I feel like that’s lazy, I’ll just say it. You’re just getting so many crappy people into that funnel. And I just think it’s not worth it.

You’re also training them to always expect a coupon. I mean, I see a lot of eCommerce sites and I don’t even have time to figure out what exactly they’re selling and they’re offering me coupons. Lazy. And it also kind of reeks of desperation in a way. Like, “Please, buy something.” But I think there’s just so many better ways to do it. A lot of people are doing, now for their blogs, like, a content upgrade.

So, there’s the blog piece and then what would be the next thing, which might be the whole thing packaged into a nice PDF with graphics and whatnot. And I don’t really think that approach is probably as successful for most eCommerce business owners, nor do I think that eCommerce businesses have a lot of really good options for lead magnets. Because a lot of times, right, it’s like, 10 things you need to know about using our product or X or Y. You know, people are just not excited about those offers anymore, you know, the lead magnet. It’s just not as effective.

So, I really, strongly suggest people try and try it. You know, maybe your experience will be different. But whatever software you’re using, there’s a million of them out there for your pop-ups or the little opt-in box, try, you know, testing different things. But I really encourage you to have one that is, like, really simple. Like, go with the essentialism route and just say like…what do you send them every month? And you can say, you know, like, discounts or special offers or, you know, be the first to pre-order new products. But just keep it super simple, you know, just super basic and see what gets the most interest.

The Lightning Round

Andrew: Love it, Andy. Want to do a quick lightning round with you here before we wrap things up. So, feel free to just, of course, as the name implies, just hit me with short, brief answers. If you had to identify one thing that you’re trying to optimize your life for right now, what would it be?

Andy: Sleep.

Andrew: Oh, I like that one. Who’s someone you strongly disagree with?

Andy: This one’s a tough one because I feel like that’s a long list. One that’s been my bug-bearer this particular week is people who don’t like libraries. Libraries are awesome.

Andrew: Who doesn’t like libraries?

Andy: I know. A lot of politicians, apparently, and people on Twitter. Libraries are cool, people. No matter how old you are or young you are.

Andrew: How much money is enough? What would be your number of money in the bank?

Andy: Ten million.

Andrew: What’s the worst investment you made in the last 10 years?

Andy: Real estate. Don’t buy things in homeowner associations.

Andrew: What’s the best investment, outside of your business, that you’ve made in the last 10 years?

Andy: I would say real estate, again. But we were just talking before the call, in Portland, Oregon, housing is at a premium. And we purchased a home instead of renting and it’s actually cheaper. So, kind of funny little quirk of economy there.

Andrew: And finally, what was the first CD you ever owned?

Andy: It was the same CD that I lip synced for in, like, sixth grade or something. I don’t actually remember which grade but I remember the lip sync. It was Guns N’ Roses, “Appetite for Destruction.”

Andrew: Nice. I was wondering when that one was gonna come up with people in the lighting round at some point. It’s a classic.

Andy: I know. I can’t believe it hasn’t come up before. That’s disappointing. But I’m happy to represent.

Andrew: We will come back. You’ll be the first but not the only one, I’m guessing, on that one. Well, Andy, this has been awesome, man. It’s cool to see such a blog that you’ve been able to create. I know few people that have as much success with their blog as you do. And I appreciate you’ve been willing to kinda let us in on some of your strategies. And also for just, you know, awesome of a community man from kinda leading the Portland ECF meetup to just being a stellar member in the forums, contributing a lot of stuff on a regular basis. It’s been a pleasure to have you as part of the group, man. So, thank you.

Andy: You’re, quite, welcome. And I’ll just say in closing for folks who’ve been with us the whole way, you know, we enjoy the blog. I enjoy thinking about the things that I want to share with people. Our writers enjoy writing for us. We enjoy sharing the, you know, topics with people. So, in closing, if you really do wanna have, you know, more with your business and your blog, what would you enjoy doing? And try that first. Because if you enjoy it, then, chances are, your customers would, too.

Andrew: Awesome. That’s a great parting shot. Thanks, Andy.

Andy: Yep.

Andrew: Want to connect with and learn from other proven, eCommerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight-knit, vetted group for store owners with at least a quarter in million dollars in annual sales. You can learn more and apply for membership at eCommerceFuel.com. Thanks so much for listening, and I’m looking forward to seeing you again next time.

I’ve been wanting to do an episode on cryptocurrencies for a long time. So I was pretty excited when I heard that Clay Collins had launched a new crypto startup. Yep, you heard that right ­ Clay Collins. One of the original internet marketers and founder of the popular Leadpages software that many of us [...]

Andrew: Welcome to the eCommerceFuel Podcast. The show dedicated to helping high six and seven figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow eCommerce entrepreneur, Andrew Youderian.

Hey guys, it’s Andrew here and welcome to the eCommerceFuel Podcast. Thanks so much for tuning in to the show today. And on this episode, I’ve got Clay Collins who is one of the long time internet marketers, I’m sure a lot of you guys are familiar with him. He’s the founder of Leadpages and he’s come out on the show to talk about really putting together awesome landing pages, email optimization, how to grow your list as quickly as possible and some of his favorite market tactics. Actually that’s a total lie, we’re not covering any of that. We’re gonna be talking about cryptocurrency, which is kind of crazy given Clay Collins’s background. But he jumped recently and stepped away from the day to day at Leadpages to start a company called Nomics, which, in his words, is aiming to be the Yahoo Finance for cryptocurrencies. Granted this isn’t tying exactly with eCommerce, but it’s something that has been in the news a lot to guess potential to really reshape how things are done in terms of commerce and potentially has some implications for eCommerce as well.

If you’re store owner, I mean, think about how much we all pay in payments, transaction fees, every year. It’s crazy, you know. And even if not it’s just an interesting topic and I’m interested in the topic and have a podcast and so I’m gonna hijack it for the cryptocurrency topic for today. So we talk about a bunch of stuff. You’re gonna learn in today’s episode what percentage of Clay’s net worth he invested originally back in 2000 and, you know, earlier…many years ago into cryptocurrencies, give you a sense of what his favorite coins are, his investment strategy. I play devil’s advocate and try to, you know, try to touch on some of the arguments against why cryptocurrencies could be something viable in the long term, talk about if cryptocurrencies are actually in a bubble, if that’s gonna burst, some of the most compelling reasons for them. We cover a lot of ground.

I have to admit, I’m a little bit of a cryptocurrency geek. A couple disclaimers starting out. I have invested a little bit in cryptocurrency, as has Clay. Everything we say in this episode is not investing advice, it’s our own personal experiences, us geeking out about something we enjoy. If you’re thinking about investing in this don’t do it based on the basis of this episode, do a lot of research on your own. Talk to a financial advisor. And this is about as speculative as it gets. So even after doing all that, you shouldn’t invest more than what you’re absolutely prepared to lose completely. So anyway, with that disclaimer out of the way, I hope you enjoy it. I had a fun time chatting with Clay and geeking out about this kind of stuff and hope you do too.

The Man Behind Leadpages

Clay, so most people listening, I would guess, know you either from kind of what I’m gonna call being an original gangster internet marketer, and more recently being the man behind Leadpages. So, you know, making the jump to crypto I would imagine a lot of people even listening… I kinda love crypto and I kind of geek out on the space so I noticed earlier, but guessing a lot of people, this is their first time hearing this. So that’s a big leap, how did that come about?

Clay: Yeah, so as an entrepreneur, I believe my sweet spot is between zero and about 15 to 20 million in annual recurring revenue. And Leadpages’ last trip got well beyond that, and I found myself kinda outside my comfort zone. And with Leadpages being my first software company was, you know, I kind of questioned whether or not this was a stage of business issue or, you know, did it have to do with the markets or, you know, was I kind of getting ahead of my skis or not. And I think after a lot of reflection, I realized that I really enjoy growing a business up to a certain scale and decided to step down. The board and I hired a fantastic CEO for Leadpages who was formally the COO. And I started just kind of looking around at that point in my life and realized that what I was most passionate about and where I saw a great deal of opportunity was in the cryptocurrency space. I believe in the space quite a bit. I think that probably 20 years from now most of the world’s wealth will have migrated outside of traditional financial instruments and most asset classes into some, you know, some form of on blockchain wealth and store value.

So I’m very bullish on the space. And I think looking more broadly at my career, I’ve always been about economic empowerment. I think at the end of the day I’m not a marketer first, I’m not an entrepreneur first, I’m someone who believes in economic empowerment. And right now, I think the biggest thing I could do towards that end is to do what I’m doing with Nomics.

Investing in Cryptocurrencies in 2013

Andrew: Very cool. So with crypto, did you…has this been something…were you one of those people who in 2009, 2010 you saw the promise or when did you start getting… When did it come on your radar in a meaningful way, and when did you start investing in it in a meaningful way?

Clay: So I started investing in early 2013. The price was between $200 and $300 per Bitcoin. And I invested in other things as well, but I remember the Bitcoin price. And my hypothesis here was that this had the potential to disrupt fiat currencies or central government issued currencies. And if it did this would be a pretty asymmetrical bet, right? So I think a lot of times when people analyze potential investments they always look at the risk. But what’s really notable I think about a lot of investment scenarios is that the cost benefit is pretty asymmetrical. In other words, if in fact, money ends up getting digitized, like so many other things in this world have become digitized, photographs, documents, I mean, I could go forever on this. But if money does end up getting digitized, and this is the way, then the ceiling on the potential value of Bitcoin is unlimited, and the floor is limited to what you invested. So if you invest a $1,000 into cryptocurrencies that could go to zero, you could lose a $1,000 and that’s probably a likely scenario, like that could happen. But that $1,000 invested in 2013 could potentially end up being worth millions of dollars. So the question I asked myself was, you know, one, do I want to invest in this? And two, what is a amount of money that I’m willing to lose? And that’s what I invested in and so far it’s gone pretty well.

Andrew: Yeah, yeah, obviously. Actually, I had a similar kind of mental exercise thinking about it. Exact same thing, your downside’s limited. Everything I put in, 100% wanted to lose and really looked at this. I kind of describe it as, I don’t buy lottery tickets, but buying a lottery ticket with the best odds I’ve ever seen of any, you know, a lottery ticket in my life, assuming you’re planning on losing everything. What percent of your net worth do you have invested in crypto?

Clay: So I prefer to not say what percentage of my current net worth is bound up in crypto. I’m willing to speak though about the amount of my historical net worth that I have invested, so in terms of what I bought in at. So I decided to invest roughly 20% of my liquid net worth into crypto, and that’s when I first started, and now it’s probably about a third of my liquid net worth. So I’m not counting Leadpages ownership and ownership in companies where that capital’s locked up or that wealth is locked up.

An Early Belief In Crypto

Andrew: Man, so 20% right at…on 2013, you had a pretty…had your premonitions, right? You believed in this strongly enough because that is… I mean, even today you hear about people radar and putting 5% in is fairly aggressive. You must have had…you must’ve really even strongly believed in it back then.

Clay: I think there’s this long history of sort of real world objects or sort of things that have existed in an analog state getting digitized and then experiencing exponential growth. So Kodak was around for a long time, they were a film company, they made cameras, and when Instagram sold to Facebook it was worth more than Kodak. You know, you’ve got Amazon which sells books and music and a variety of things online, and you’ve got Barnes and Noble going out of business. You had Netflix come along and distribute digitally and Blockbuster went out of business. You know, the iTunes music store and what’s currently happening with CDs. So I think there’s this progression of technologies, you know, going digital, hopping on Moore’s Law and jumping in an exponential direction. And the network effects that exists in the cryptocurrency space are so powerful and what I saw happening in the community building up around the space, I felt convinced that a basket of top cryptocurrencies would outperform just about anything else I could invest in at the time.

So my hypothesis was not that it would be Bitcoin, my hypothesis was that if I owned roughly an equal percentage of the market cap of the top 10 crypto assets that were attempting to be currencies not, you know, utility coins, or app coins, or whatever. But if I owned a basket of the top 10 cryptocurrencies, that that basket would outperform everything else. And it’s not that it would be Bitcoin or, you know, it could be something else. But I really didn’t care what it was, I just wanted to own a diversified portfolio of cryptoccurrencies. And so far Bitcoin is beating out just about everything else.

The Strongest Case for Digital Money

Andrew: What is it that made you…obviously you saw a lot of things moving digitally, you saw a great community around that. But at some level, digital for digital sake is not a good reason. The reason Netflix has put Blockbuster out of business is because there’s a huge convenience factor there and a selection factor there. And so for crypto, what do you think the utility…the strongest argument is, in your opinion, for cryptocurrencies? You can have a number of them. You know, the fact that the fiat money system is gonna break down, central banks aren’t trustworthy, that could be one. Some of the benefits of a traditional money in terms of easier to transfer, there’s lower fees or maybe others. You know, one of those or any other one that you think is the strongest case for convenience or utility standpoint.

Clay: So there are a lot of benefits of using and holding cryptocurrencies. You can talk about privacy, you can talk about censorship resistant transactions, you can talk about the fact that it’s not controlled by any central government. For me, the core feature was the fact that Bitcoin and most cryptocurrencies are deflationary, meaning that there is a limited supply of tokens or coins that can ever exist and a government can just decide to print money. I believe that every time the U.S. government prints more USD, they are stealing from holders of U.S. dollars by inflating that currency. And the U.S. government gets to spend that money first, right? So the greater the circulation of the money that just inflated the pool of dollars, the more the inflation takes hold. So if, let’s just say, there’s a thought experiment, there’s only a million U.S. dollars out there, if I spend another million dollars or if I print another million dollars, when I spend the next incremental dollar on top of the existing pool of a million that dollar’s worth as much as the other million. But the more I spend and the more the money that I get spend gets re-spent, the more inflation takes hold. So the government usually takes advantage of the people first. So I really liked that there could only be 21 million Bitcoin ever created. And even with cryptocurrencies like Ethereum, the number of new tokens that can be created every year is fixed. So as a percentage of overall supply the inflation goes down every single year and eventually trends to zero.

An Argument Against The Bitcoins of the World

Andrew: At least we’ve talked and you get the sense that I’m a kind of a cryptocurrency fan as well. I’ve invested in the space a little bit. But I wanna play skeptic a little bit, play devil’s advocate because I think to try to have some kind of…to try to be a little bit a fair balance here. So do you think, kind of putting on that hat, Bitcoin is the… I know in there when you started investing you invested in the basket because you didn’t know if it was gonna be Bitcoin or someone else. Today in 2017, four years after you kind of gotten to the market, do you think Bitcoin is gonna be the primary cryptocurrency of the future, at least the near term, let’s say five to ten years given that the head start they have, the network effects they have? Or do you think it could just as easily be a different coin? Because I feel like one of the most compelling arguments against, at least Bitcoin, is you look at how easy it is to fork something, you know. We’ve got the Bitcoin cash, Bitcoin gold, it’s software. So yes, it’s only 21 million coins at some point and fixed, but it’s so easy to fork these different things that if sentiment changes and so much of its value, if not all its value, is tied up in a network effect of people all being on board, if that changes, you could have such a fast exodus. So do you think Bitcoin is the best chance or is it gonna be the one in the next five years or it could just as easily be someone else?

Clay: I personally do believe it’s Bitcoin, but I still maintain my basket, so there’s a percentage of the overall supply of Bitcoin that I want to own, and I also own that same percentage of other cryptocurrencies. It’s just a lot cheaper to purchase that percentage of other cryptocurrencies than it was to purchase it, you know, in Bitcoin. But the reason why I believe it will be Bitcoin is because the network effects there are so strong. So for anyone listening that doesn’t know what a network effect is, a network effect is when a network becomes more powerful, or more entrenched, or more sticky for every additional person that uses it.

So owning a phone makes…every time someone gets a phone, it makes owning a phone more valuable to everyone else who owns a phone. And that’s an example of a network effect. So Facebook, right, has a pretty entrenched network. You could build a much better Facebook than Facebook, but you would be hard pressed to overtake Facebook because you’d have to get everyone on Facebook to move to another platform and that network essentially has no value unless your friends are there, right? And that’s why it’s really important that these tokens be distributed. So someone could come in and buy 100% of Bitcoins in existence. And that would actually make Bitcoin entirely valueless, right? It’s the network that counts. And the network isn’t just around holders of Bitcoin, it’s the development community, it’s the amount of thinking and publishing that’s happened around it, it’s payment processors, it’s exchanges, it’s points of sale, it’s hardware wallets. There’s a lot that goes into the underlying infrastructure that supports Bitcoin. And I just can’t see another currency getting that kind of momentum in catching up any time soon.

Overpriced or Overlooked

Andrew: What about looking, you know, so many people have called Bitcoin a bubble. You know, you look at people like Jamie Dimon who guy but, I mean, he also was very much the great assault that he, you know, runs one of the largest institutions that potentially could be disrupted by this. But you look at people like…institutions like The Economist, you look at Buffet, a lot of people with pretty good track records are calling it a bubble. And I think you can definitely say you can have something with a lot of utility and potential i.e. cryptocurrencies, but you can also have…even if it has those, it can definitely be overvalued and be in a bubble. So thoughts on that right now. Apart from the utility side, on the pricing side, do you think given how quickly it’s gone up, you know, almost, you know, seven, eight X just in less than a year, despite your long term bullish outlook, do you think it’s overvalued right now? Do you think it’s overpriced?

Clay: Yeah. So it’s an interesting question about whether or not there’s a bubble. I think bubbles are traditionally characterized relative to the underlying value of a security. So you might say there’s an Amazon.com bubble because Amazon’s trading it like, you know, well…

Andrew: 500 likes.

Clay: Yeah, like a 500 X multiple, right? The issue with cryptocurrencies is there really is no underlying asset, right? The U.S. dollar abandoned the gold standard and so the U.S. dollar is backed by nothing other than the U.S. military and sort of our dominance in the world, is backed by guns and bombs. At least Bitcoin is backed by electricity and hashing power, and the network that secures the Bitcoin blockchain. So it’s, in my view, what people refer to a bubble is really just an exodus of wealth from USD to Bitcoin but there’s really not a framework for analyzing whether or not it’s a bubble. I mean, you could say that there is a digital photography bubble when everyone stopped using film and started moving to digital cameras. Is that a bubble or is the technology just changing? Was there a CD bubble when people moved from cassette tapes to CDs? No. It’s actually the same thing, it’s just taking on a different form. So I guess like that’s one lens that I see this from. Another lens, through which I look at this, is the dot com bubble. So the dot com bubble, if you could value that bubble, if you could put a price tag on that bubble, was $6.7 trillion. Bitcoin right now is at about 120 billion. So if you compare 6.7 trillion to 120 billion it makes this bubble look pretty puny in comparison even though the potential for cryptocurrencies is much larger than the dot com bubble.

Like when entrepreneurs look for large markets, you know, they try and analyze like, is this a billion dollar opportunity? How big is the market? Is it a 10 billion dollar market? Is it a 100 billion dollar market? Well, what larger market can exist out there than all of USD in circulation? Like, I can’t think of a larger market. So in my view, you know, $120 billion of wealth held by Bitcoin right now is a small fraction of its potential. And I know I’m sounding like a maximalist right now, there’s a lot of euphoria here, but I really believe this to be true. And if it’s not Bitcoin it’s gonna be another form of decentralized electronic cash. But yeah, I’m a fan.

How to Value Digital Currency In Its Current State

Andrew: What about looking at Bitcoin…there’s kind of two ways you can look at it. You can look at it as a store of value, something like digital gold that’s not meant to be a currency as much, as more of a place you park your money and it’s protected. Secondly, you could look at it as, you know, a traditional currency where you could use it to buy and sell things. Kind of the third, which is probably a lesser one, something like Ethereum where you have some kind of built in function like a programming language, Bitcoin doesn’t really have that. Which side of those are you on? Are you on more on the store of value side, or do you think that with some of the…like the [inaudible 00:22:04] networks and the tech upgrades in the future that could get over some of the higher, you know, some of the higher transaction fees that Bitcoin currently has and processing speeds, that Bitcoin could actually be a currency and a store value? Or are you more in the camp of where Bitcoin’s gonna be a store of value and then we’ll probably have something else, some other maybe secondary currency really serve more of that digital cash role?

Clay: Yeah, that’s a great question. I think it’s important to remember that Bitcoin is a protocol just like TCP/IP is a protocol. So we never tried to cram all the functionality of HTML and CSS and JavaScript into TCP/IP. We understood what TCP/IP was and that’s what we use it for. And I think it’s problematic when people try to store 100% of the utility value of something in the protocol layer. So I believe that long term Bitcoin is going to be a settlement layer, and it’s going to support all the layers that exist on top of it. So if you look at the Visa network, Visa network handles 24,000 transactions per second, a lot. But Visa isn’t crediting people’s bank accounts 24,000 times per second. They settle at the end of every day. And that’s likely how Bitcoin is going to work, you’re going to have layers on top of Bitcoin that do all kinds of different things. Maybe smart contracts are gonna be, you know, housed in those layers or some kind of system like the lightning network that allows for essentially free transactions in micro payments that happen in, you know, five to ten milliseconds. I believe in second, third, fourth, fifth layer and that it’s just incorrect to try and cram all this stuff in at the protocol layer. Now, that doesn’t mean I’m against the block size increase, but I don’t think 100% of the functionality needs to exist in the protocol.

Will Bitcoin Be The New Debit Card?

Andrew: That makes a lot of sense. One thing that’s been interesting is…so myself, people listening, primarily have an eCommerce background. And I put…before I sold my store I had Bitcoin on my Shopify check out, you know, and I had it up for probably a year and I was, you know, I was in a market that probably had…maybe not demographically on the age side, but at least on the mentality side, a lot of, you know, more than your fair share… I was in the CB radio market… had more than your fair share of preppers, libertarians, people who didn’t trust the government, right? And even in that full year, I think only one person ended up checking out with Bitcoin partially because, you know, it’s new, it’s not super convenient or easy to do quite yet especially, if you’ve never done it before, it’s pretty easy once you do it. But more so, I think maybe, on a broader sense, you look…as a consumer looking to buy something and if I go buy something from a store, one nice thing of using a credit card is that yes, there’s a fees, I don’t have to pay for them, but I know that I can charge something back. If I don’t get my product, I have some recourse i.e. with Visa or Discover whoever it is. You don’t have that with Bitcoin because it’s a one-way irreversible transaction. Do you think that we’ll see Bitcoin actually be used broadly as a way to buy things online, given the fact that it’s irreversible?

Clay: I absolutely do. So I think right now, given that there really aren’t any widely adopted layers on top of Bitcoin, most people just are not willing to spend an asset that’s likely to appreciate in value instead of something that’s likely to depreciate in value, i.e. U.S. dollars or whatever your Visa denominated in. I think about that whenever I go to spend Bitcoin it’s like, you know, Bitcoin has gone up 600% in the last year, why do I wanna spend that? So that’s one way to look at it. But I absolutely think there’s gonna be some kind of equivalent to the protections that Visa gives you on the Lighting Network or drivechains, or whatever ends up emerging. The Lighting Network uses time-locked smart contracts. It’s very reasonable that, you know, whatever smart contract type is used in the future, that it would allow for you to lock that money in escrow during some kind of review period and pull it back if you don’t approve of the way the business delivered, you know, delivered the product, or the product doesn’t work, or what have you. So smart contracts would absolutely allow for that. And coming up pretty soon here Rootstock will be releasing their one-to-one pegged smart contract system on top of the Bitcoin blockchain which would allow for, you know, solidity contracts and Ethereum-type functionality on Bitcoin. Maybe it’ll work, maybe it won’t, but something like that is coming and coming soon. So I think all of this stuff can be modeled, it’s just not gonna all be what we know today as being Bitcoin.

The Invisible Risk

Andrew: One thing I’d love to get your take on the drastic differences and approaches and the kind of ways people look at cryptocurrency based on their age. And I’m really, you know, really generalizing here. You can have, you know, 60-year-old people that are incredibly sophisticated and, you know, are incredible programmers, and you can have 20-year-old people who live in the woods and hate technology. But I have noticed at some level…a comfort level that’s much higher with people that say, that are, you know, just 20s and 30s versus 50s and 60s with cryptocurrency. And even something where…I saw a report where I think something like 30% of millennials would prefer to have Bitcoin than stocks, which I thought was pretty telling. How much do you think of that plays into maybe, one, how much you have the sort of those traditional people I mentioned earlier, Dimon, [inaudible 00:28:22] places like The Economist, really having a more of a pessimistic view? And conversely too, how much do you think the fact that you’ve got people, you know, in their 20s and 30s who maybe if they remember the stock market crash of 2000, they certainly didn’t have much money in there. Maybe they had a tiny bit in 2008, but still most of us probably didn’t have a ton of money then when it crashed 10 years ago. How much you think that also makes us maybe under appreciate the risk that could be there that we’re not seeing?

Clay: Yeah. You know, I think millennials and the generation that has come…that sort of native to the internet…that, you know, they’ve never known life without the internet, is very comfortable spending money for Candy Crush coins or World of Warcraft items… People are very comfortable spending money for digital assets, so in a lot of ways this really is no different. You’re converting fiat currencies into some kind of digital instantiation of that wealth that can be spent in a way that you value. I think that plays a role. I also think that part of the story behind Bitcoin really is the financial crash of 2008, 2009 which was when the Satoshi Nakamoto white paper was published and the Bitcoin blockchain got started. I mean, we’re approaching 10 years if it hasn’t… no, it hasn’t been… I don’t believe it’s been 10 years just yet, but that financial crash was part of the genesis for all of this. And the aftermath of the financial crash had the U.S. government printing insane amounts of cash to rescue banks, bankers got huge bonuses. And so I think that it is important to realize that there really was a need for a censorship-resistant form of money that governments couldn’t screw with, that would allow people to a different option. And when you see the financial crisis that exists in Argentina with, you know, insane amounts of fiat currency being printed there, what’s happening in Greece, in Cyprus, and Venezuela.

Every time these types of collapses happen, you see more and more wealth shifting to Bitcoin because in a lot of ways, it’s a much more stable store of wealth and it’s actually less risky than having your income stored in several fiat currencies that are in the world right now. So I think it’s somewhat analogous to the kind of risk taking that entrepreneurs take. So I’ve heard people ask entrepreneurs before like why do you do this? Isn’t this a fairly risky thing for you to do? And a lot of entrepreneurs will respond with, having a job is a risky thing to do. I could get fired at any moment, my division could get shut down, markets could change, and I have literally no control over those scenarios. But when I’m an entrepreneur, the destiny’s in my own hands. And there’s a similar thing that happens with Bitcoin where someone who is willing to do due diligence can say, hey, I don’t know what people are gonna do or what the government’s gonna do with my currency. I don’t understand this complex, interconnected, multifaceted financial system that exists, but I can read every single line of code that is part of Bitcoin right now, and I understand that. And this is a lot more easily digestible than this overly complex financial system that exists in the world today at scale. So I trust this thing because I actually understand it and because it’s not in the hands of the rich or the 1% or the government elite or politicians. It’s in control, you know, it’s being controlled by the people.

On Manipulating the Market

Andrew: What are your thoughts on people coming into the market and really manipulating it? I mean, if I was… Say, for example, you look at the average market volume of Bitcoin per day, it looks like roughly…market caps go 120, 130 billion. Average market volume per day is about two billion-ish, I think. And so if you’re a hedge fund…like the largest hedge fund, I think in the U.S. Bridgewater Capital, they have about 150 billion, I believe, under management. So to be able to trade a couple of billion per day, I mean, it’s pretty feasible they could do that and that’s something where you can really move the markets. There’s no SCC, there’s no oversight. So what are your thoughts on how much… I mean, if I was a hedge fund this is like the perfect place to try to, you know, manipulate the markets and take a profit. So how much do you think that’s happening and how much do you think that’s driving what’s happening in the market there?

Clay: Hedge funds right now are largely barred from buying Bitcoin for a number of reasons. One, there’s a custodianship issue. Many types of hedge funds aren’t allowed to actually hold assets that are classified as commodities, those commodities held by a trusted third party. That’s problematic for a number of reasons. So there’s this custodianship issue that prevents them from buying Bitcoin. There’s also sometimes these contractual exclusions that bar them from purchasing certain types of asset classes. So a lot of hedge funds will spell out the types of securities and assets that they can purchase as part of those funds. Wall Street really has not invested in this asset class yet, institutional money hasn’t got in. And that’s a good thing, in my view. Most sophisticated financial instruments are usually only available to the wealthy first. There’s a lot of things that hedge funds and the ultra rich can do with their money that most people don’t have access to, and Bitcoin is kind of the opposite. It started out with an investment from the bottom and it’s slowly going up market, well, I get…it’s probably quickly going up market to institutional investors. And that’s part of what’s driving the increase in price here, is people wanting to get in before like Bridgewater executes a, you know, $10 billion block trade and jacks up the price overnight.

So I think it’s likely, I think it’s gonna happen, it opens the possibility for a lot of manipulation. But I also don’t think Bridgewater is going to buy, you know, $10 billion of Bitcoin overnight. You know, probably… What’s much more likely to happen is a bunch of these hedge funds saying, hey, we’re gonna have 1/2% allocation or a 1% allocation to get exposure and we’re not going to do that buy all at once. We’re gonna do it in small increments over a large period of time, so that we don’t drive the price up.

Capping Your Crypto Buys

Andrew: Yeah, it makes sense. I’m gonna transition a little bit into thinking about investing, buying and storing Bitcoin and just kind of…you mentioned this at the top already, but just as a reminder, this is not any…this is not investment advice at all if you’re listening. If you’re thinking about doing this, you need to chat with somebody professionally. This is just Clay’s opinion and my opinion and what we’re doing, so please don’t take this as investment advice in any way. Are you still currently buying into at the levels today, especially [inaudible 00:36:37] Bitcoins as one? Are you still buying into the market or have you kind of…do you think that a lot of the easy gains are gone and you’re just kind of holding with what you’ve got right now?

Clay: Yeah, so great question. At the end of last year I put a cap on how much crypto I would buy and it was based on my ideas about portfolio risk and how much risk I wanted to take on. So I set that cap and…

Andrew: No more than 90% of my liquid net worth in crypto. I think that is as far as I’m gonna go.

Clay: It’s much less than that. So I set that cap and at some point I had bought all that I was going to buy. Now, I’ve still invested in crypto hedge funds that have returned crypto back to me and I’ve made investments in lesser currencies that have gone up in some cases a 1,000%, and that’s allowed me to buy more Bitcoin. But I haven’t put more fiat currency or more U.S. dollars towards cryptocurrencies recently because it’s like I wanna stay responsible. I’ve got a family, I’ve got two children, the insanity has to be capped at some place.

Clay’s Top 3 Currencies

Andrew: If you… I know you hold a basket, you know, the top 10, given the fact that you’re not sure…you think Bitcoin’s gonna be the winner, but you’re not sure [inaudible 00:38:07]. Let’s say someone came in and, you know, put a gun to your head and…terrible analogy, but we’ll roll with it, and said you gotta divest off all of your crypt except for three currencies. You can hold three currencies, that’s it. Move it all into there. Which three would you hold right now?

Clay: Yeah, that’s a great question. It would probably be Bitcoin, Ethereum, either Litecoin or Monero. That’s got a store of value coin which is Bitcoin, that’s got smart contract coin which is Ethereum, and then a privacy coin.

Build Your Own Software Wallet

Andrew: But how do you get to store the coins that you do own? And this kind two different types for people, three ways, I guess. You can have a software wallet so that’s really just a program on your computer that stores the coins, and by coins really, it stores your private key and allows you to transfer those. That’s one option. A second option is a hardware wallet, so something like a TREZOR which is actually like a little…almost looks like a USB key that you can store things on, that gives a little more protection, that it keeps your private key off of your operating system, so much safer from hackers or people who might be able to access your computer. And then the third way is actually just, you know, cold storage or paper storage where you’re printing or writing that private key off somewhere and storing that physically. What are your thoughts on all three of those? How do you store your coins, what’s your approach for all that?

Clay: Unfortunately, I have a pretty complex scheme here and I don’t talk about it publicly, but I can provide some recommendations here. So I have diversified my custodial risk so there’s a bunch of different ways that I store my crypto assets, and the vast majority of my funds are like time locked. So you could come in, put a gun to my head and I couldn’t give you what I have even if I wanted to because of how I have it set up. I think most people would do well to use a combination of Coinbase which insures your funds and a hardware wallet like TREZOR or Ledger Nano S. So I would use both of those, I’d have your stuff in a Coinbase vault and I would use a hardware wallet.

How To Invest

Andrew: Are there… If somebody, you know, if someone wants to buy crypto, a lot of times the… In the U.S. the most obvious way is Coinbase like you mentioned [inaudible 00:40:36] or Bittrex or Kraken, some of these other exchanges. But if somebody wants to either invest in…wanna go through any of those routes or maybe they wanna invest in like an IRA, [inaudible 00:40:45] investment advice that wouldn’t recommend putting a lot of your IRA retirement money in this. If they did and independently decided they want to do that, are there any good traditional methods for getting Bitcoin exposure or crypto exposure in a traditional brokerage account? The one or two that I’ve seen so far don’t look appealing because you end up paying it seems like a huge premium for the underlying cryptos. Are there any that you see that are appealing?

Clay: There really isn’t right now. And I think it’s really best to have control of the underlying asset versus a derivative which is cash-settled and approximates the Bitcoin price. I’d say if you’re gonna own Bitcoin, own Bitcoin, hold it, control it, make sure that you have your own private keys that, you know… It’s not your Bitcoin unless you have the private keys. I saw a joke on Twitter, someone was saying…someone claiming to be Satoshi Nakamoto lost their keys because the dog ate the keys and someone responded that, well, that would mean that Satoshi Nakamoto’s dog is actually Satoshi because he had control of the private keys. So make sure you own your private keys, make sure you own the underlying asset. There will probably be an ETF at some point where you can get exposure to the gains without actually holding crypto, but I think long term that’s a much riskier proposition than just investing the time necessary to purchase the asset yourself.

Clay’s New Startup Nomics

Andrew: I wanna talk about Nomics before we wrap up. So Nomics, of course, is the startup that you’ve recently begun. What…and you kind of described it as, you know, the Yahoo Finance for crypto. Can you give us a little more sense of what it is? What are you trying to do with Nomics?

Clay: Yeah, so Nomics has two parts, there’s the front end and the back end. The front end is essentially attempting to be the Yahoo Finance or the Google Finance for the cryptocurrency space. There are a lot of competitors there right now, none of them are well-funded, none of them appear to be taking this seriously. Many of them are running ads for scams on their home pages and they’re just not being built by real software development teams. So that’s the front end. The attempt there is to create a consumer grade…and I mean consumer grade in the best possible way, but to create a consumer grade front end to make this stuff accessible and understandable to everyone. Now, that front end consumes the back end API that we’re building. So we’re indexing the entire cryptosphere. So not just every trade and transaction that happens, but even every single order that gets placed on exchanges, even if those orders aren’t filled. And right now, it’s doable to do that, but difficult. Ten years from now, it’s gonna be pretty much impossible to do that unless you started kind of where we are right now and built up that muscle over time. So I kind of think about Google and what’s impressive about what they do in the search space. And what’s most impressive about what Google does is not necessarily their algorithm, there’s a lot of data scientists that could probably do as good a job as Google does creating their algorithm. What’s most impressive about Google is the fact that they index the Web multiple times a day, no matter how much the Web grows they’re indexing it and we’re doing that as well. So the front end play is probably what most people are going to see, the back end is probably what’s most impressive. And we’re selling our data to hedge funds, family offices, institutional investors through paid API. And that’s how we’re gonna make most of our money, almost all of our money. And the front end is gonna stay free, probably forever.

Andrew: Are you bootstrapping this or are you guys taking money raising money for it?

Clay: We are self-funding. So we might raise money at some point in the future, but we’re in no rush to do it. We don’t need to do it. We’d probably do it to get certain types of expertise involved with the business and having a stake in the business, I doubt we’ll do it ever because we need the capital.

Andrew: And you’ve got a great newsletter over there that comes out once a week with kind of a really nice round up of what’s going on in the crypto space. I’ve been enjoying getting that. And if you wanna check out more, Nomics, N as in Nancy, O, M as in Mary, I-C-S.com, nomics.com. And we’ll link up to that in the show notes. I highly recommend if you’re interested all in this get a newsletter, it’s worth reading.

Clay: It’s like economics without the eco.

Resources To Get You Started

Andrew: Yes, thank you. Good way to describe it. That’s a wrap up of the crypto section here. Couple of things I’ll link up to you that I have found valuable, really interesting article from Scott Galloway chatting with one of his colleagues over at NYU about how to value cryptocurrencies or pricing versus [inaudible 00:46:11] which is an interesting discussion. And then another podcast, it’s called “Invest Like the Best.” Host over there did a really great three-part series called Hash Power, all about this. I’ve done a real deep dive, I’ll link up to that too, it’s well worth listening to. Clay, do you have any thoughts for people who are looking to dive deeper down the rabbit hole here, great resources or things you’d recommend?

Clay: Yeah. So there’s a talk that Chris Burniske gave at Token Summit on cryptoasset valuations which I think is pretty good. I can get you that link. I also think the interview that Tim Ferriss did with Nick Szabo is really good. So a lot of people think Nick Szabo is Satoshi Nakamoto. I have no idea who it is, but if I had to make a bet I’d probably bet that Nick Szabo is Satoshi Nakamoto. I think that’s good. There’s a book called “Digital Gold” which is a narrative style book that tells the story of the genesis of this movement and of Bitcoin. And it’s really well done, it’s really entertaining, it’s not this dry academic treaties, it’s a fun read, and it’s got a arc and all that stuff. So I’d recommend that book as well. I’m also coming out with a podcast the beginning of December, which I think will be enjoyable. But everything we’re doing is really for crypto investors who are not doing general “how to” stuff or talking about, you know, doing deep dives on the technology or how this all works or even getting much into the social implications. It’s mostly stuff that’s purely for investors by investors.

Andrew: And is that gonna be called The Nomics Podcast?

Clay: No, it’s gonna be…it’s tentatively titled “Flippening.” And that would be at flippening.com. There’s nothing there right now.

The Lightning Round!

Andrew: Clay, this has been really interesting. One thing I wanna do before we kind of officially wrap up here is do a lightning round with you. I do this with most of our guests here. So if you’re up for it I’ll dive in and just you can give me rapid fire answers.

Clay: Awesome. Let’s go.

Andrew: What’s the number one thing you’re trying to optimize your life for right now?

Clay: Ease.

Andrew: Who’s someone you strongly disagree with?

Clay: Donald Trump.

Andrew: How much money is enough so, you know, money in the bank or you would be satisfied, that’s the number.

Clay: Oh, not much, 50 million.

Andrew: What’s the worst investment you made in the last 10 years.

Clay: Oh, arguing with people. Time spent arguing with people.

Andrew: I think I have a hunch what the answer is gonna be here. What’s the best investment, apart from your business, you’ve made in the last 10 years? I’m guessing it’s gonna be crypto so maybe to make it a little more interesting if there’s a specific coin that you’ve invested in that has been the best?

Clay: Yeah, Bitcoin.

Andrew: Bitcoin. The first CD you ever owned.

Clay: REM.

Andrew: REM, nice.

Clay: Sorry, I don’t remember what the album was, probably REM.

Andrew: A couple customized ones here for you. I gotta get a pricing prediction out of you, it’s just how these things go. What do you think the price of Bitcoin will be in 10 years, if you had to guess?

Clay: A million bucks.

Andrew: What do you think the market cap of the broader crypto ecosystem will be in 10 years? It’s, you know, call it 200 billion right now, where do you think we’ll be in 10 years for all crypto?

Clay: A third of USD, in circulation.

Andrew: Oh, yes. This has been…my guests had a lot of fun. I’m excited to see what you do with Nomics over the, you know, the coming years. Congrats on, of course, everything you’ve done in the past with Leadpages all the way through. So it’s been fun following your career. I remember in the very early days when I was getting eCommerceFuel going, stealing one of your subject lines, “Now, welcome, welcome. Please open [inaudible 00:49:48]” that little hack. And I noticed you use that too with your Nomics newsletter as well which made me smile so…

Clay: If it works, it works.

Andrew: It works. It works beautifully. Anyway, thanks for being an awesome [inaudible 00:50:00] shared so much in the space, and best of luck with Nomics. I’m excited to see how it goes.

Clay: Andrew, thanks for having me.

Andrew: Want to connect with and learn from other proven eCommerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight knit, vetted group for store owners with at least a quarter million dollars in annual sales. You can learn more and apply for membership at ecommercefuel.com. Thanks so much for listening, and I’m looking forward to seeing you again next time.

Everyone knows Warren Buffet: the super-rich investing genius who drives a cheap car, guzzles Coke has shrewdly assembled a portfolio that’s made him billions. What if you could do that with small eCommerce companies? My first reaction to the idea is a million reasons why it’d be extremely difficult to pull off. But Shakil Prasla of SZVentures.com has managed to build a portfolio of over a dozen stores, all run and managed by business manager who take care of the day­ to­day. I do a deep ­dive with this mini­ Buffet on his process and we discuss: How he’s been able to get non­recourse loans to finance deals His absolute favorite type of business to buy The 6 criteria he looks for when evaluating investments If you didn’t catch the first part of my discussion with Shakil on Hiring a Business Manager you may want to check that out first. Otherwise, enjoy! Subscribe: iTunes | Stitcher (With your host Andrew Youderian of eCommerceFuel.com and Shakil Prasla of SZVentures.com) Andrew: Welcome to the “eCommerceFuel” podcast, [...]

Andrew: Welcome to the “eCommerceFuel” podcast, the show dedicated to helping high six and seven-figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow eCommerce entrepreneur, Andrew Youderian.

Hey, guys. Andrew here, and welcome to eCommerceFuel podcast. Thanks so much for joining me today, and excited to dive back into part two of my discussion with Shakil from SZVentures. Shakil, as you know, if you listened to last week, runs a portfolio, really owns a portfolio of eCommerce businesses and investments. And last week we talked about how to hire, train, and incentivize business managers, people you can put in place to run your business day-to-day. Today, we’re gonna take more of a macro approach and talk about how he’s assembled a portfolio of, you know, more than a dozen different companies over the last five years, everything from deal sourcing, to negotiating terms, to the process of kinda coming out the backside and getting the business managers up and running, and his thoughts on just what types of deals that are his favorite as well.

Shakil’s “Warren Buffet” Style Approach

It’s very cool. He reminds me of, you know, Warren Buffett’s style approach. Warren Buffett, of course, built an amazing portfolio. He doesn’t manage them day-to-day, and his real value and focus is on the the deal making, the valuation, investing for the long term, and that’s what Shakil has done. And one thing that I find really impressive as well, I didn’t talk about this in the interview, but off mic I was chatting with him, and Shakil isn’t working 80, 90, 100 hours per week, obviously, doing very well, but he’s able to do this in a way where he works 40-ish hours per week, and that’s gonna vary, of course. If he’s closing a deal, that might spike up considerably, but he’s able to do this without selling his soul, which is really impressive. Anytime you can do something this impressive without completely tilting your life out of balance, I think that’s even more admirable and, you know, something I wanna learn from. So, let’s go ahead and get right into it. I will pick it up right where we left off last time talking about Shakil’s kinda…starting with his overarching strategy and then diving in.

Shakil’s Hiring/Nurturing/Coaching Process for Managers

So, Shakil, I’d love to take a little bit step backward and a deep dive on kinda hiring those managers, because I was fascinated with that. But, at a broad level, I wanna go through the process of how you do this, you know, maybe like a 30,000-foot view. So what’s your MO, your kinda playbook for going from finding deals, to closing them, to that transition period, really getting from when you don’t even have, you know, any deals that you’re considering all the way to the point where you’re having those weekly or monthly calls with your managers and just more or less nurturing them and coaching them along? What does that process look like in a high level? And then we’ll dive into the specifics.

Shakil: Well, all the way from the beginning, you know, I’m talking to you today, but all of a sudden there could be a deal that comes tomorrow. And usually whenever a deal comes for sale, I’ll ask for the prospectus. If it looks interesting to me, I’ll ask a standard 15 set questions that I ask, you know, and they include anything like, “Why are you selling your business? What are some growth opportunities you wanted to implement but you weren’t able to?” And, you know, questions like that. And once I get those 15 questions back, I’ll see if I wanna proceed further.

If I do, I’ll ask the broker, “Hey, can you get me on a call with the seller? Let’s get to know this business better.” If I’m still interested at that point, I’ll ask maybe some couple technical questions, and I’ll place an offer on the business usually depending on the other offers, if there’s other people bidding with me. If he accepts it, I’ll submit an LOI, we’ll go into due diligence, and I’ll ask a standard list of documents I need from them. So, you know, I’ll include a tax return, access to back-end system, analytics. And, for the next 30 days, I pretty much play a detective, and so I go into the finances to see how it’s looking, is it everything the prospect has said, are there any growth opportunities I could maybe implement on if I take over the business. Usually, during this process, I’ll also be looking for a business manager, and if I need financing, I’ll engage a bank as well.

After the 30 days, we’ll kinda beef up our terms, and we’ll come up with an asset purchase agreement, and usually, with the asset purchase agreement, I’ll ask the seller to stay on for at least, you know, 60 days. The standard is 30 days. I’ll ask for at least 60 to 90 days at which point we fund the deal, I take over the company, I hire the manager, and at that point we work hand in hand with the previous owner on learning the business. Now, I’m a student. Now, I’m learning the business with my business manager, coming up with processes, and procedures, and manuals. And once the 60 to 90 days are up, it’s time to execute. For the next four months, I try to see where I could automate the business, what are some low-hanging fruits we could implement, and just do that. And after, you know, six months, I pretty much am hands off. The manager runs it. We have a weekly call. I’m available on Skype, on Slack. Yeah. That’s the high-level 30,000-view.

Three Deals in 12 Months

Andrew: So you mentioned you’re digging on the prospectus. How many deals on an average year would you close, two to three?

Shakil: Yeah. You know, so I probably look at one to two deals a day, and this is just kinda high-level, what the business is called. From then on, I will probably ask a prospectus for about 100 of them, and this is a year. Out of the 100, I will maybe ask some follow-up questions, 30 of them, and then I will place an offer on 6 of them, and I’ll close about 3 of them. So that’s exactly what’s happened in the last 12 months, is I’ve closed 3 deals.

The Deal Flow

Andrew: And where do you get your deal flow? I’m guessing you’ve got traditional sources on, like, business brokers, places like Quiet Light Brokerage or FE International. Where do you get most of your deal flow, and, maybe even more interestingly, where do you find deals that… Give any interesting sources of deal flow that maybe give you an advantage over other people.

Shakil: Well, certainly. There are brokers that come to me first and say, “Hey, we have a listing that’s coming for sale. Would you like to take a first look at it?” And these are brokers who I’ve bought from in the past, right? So I’ve bought seven businesses, and I’ve kept the relationship with all of them, and these are well-known brokers, right? These are Quiet Light Brokerage, you have your FE International, Website Closers, Website Property, Empire Flippers, all those guys. But all these companies, all these brokers list their business on BizBuySell. And here’s a good way for people to find businesses for sale, go to bizbuysell.com, type in the income you’re looking for, type in the revenue you’re looking for. When you click Search, there’s a pop-up that comes up, and it will say, “Do you want weekly alerts on this?” Click Yes. Enter your e-mail address. Now, every week you will receive a business that comes for sale right away. You can keep that daily, but this is, you know, a good way to really see any businesses that are coming for sale, online businesses.

Criteria for Buying a Store

Andrew: And what are your most important… You’re looking at all these deals. One of the criteria you have for buying on your site… I think there’s six that I found on your site. Maybe I’ll go through these. Maybe you can just mention if there’s any that I’m missing. But you’re looking for something’s that’s an evergreen niche. So I’m guessing something that is not fetish, has a year-over-year growth, has been in business at least a couple years, at least half the traffic is organic, serving an underserved market, it has at least 100k in net profit per year. Are there any other that I’m missing, or are those the big ones?

Shakil: Yeah. And I would say, out of those, you know, five or six you listed, the two biggest things for me are how long has the business been in business. That’s number one, because the longer it’s been in business, the more sales strategies it comes with, the more things that are worked out it comes with, you know, the better suppliers, the bigger customer list it comes with. That’s a big thing, and the second big thing is growth opportunities, you know, what are some low-hanging fruits I could implement right away. You know, I could go through all seven of my businesses, and, you know, Andrew, you’ve been in eCommerce for a long time. If you look at the prospectus, you’ll definitely be able to identify the two or three things, growth opportunities. I was as well. You know, these are things like this guy is selling on eBay. At least, I am selling on Amazon. He has 15,000 e-mails, but he doesn’t even utilize it. So it’s growth opportunities that I look for that are huge when I want to take over the business.

The High Cost of Organic

Andrew: You have in there 50% plus organic traffic, and on one hand you can make the argument that’s great, because you get free traffic. On the other hand, you could make the argument, potentially a liability as someone who’s gotten hit and lost 80% of my organic traffic overnight. It’s a scary thing, whereas if the business can be profitable through paid channels, then it’s a little bit. You always have the risk, of course, of the ever upward creep of paying for customers and CPA cost. Why is it in your pro list versus potentially a liability?

Shakil: That’s true. Well, when I first started buying online businesses, I was pretty much looking for businesses that did only organic traffic. You know, over time, in the last four years, things have really changed. There’s different ways you could get traffic, right? There’s Facebook Ads. There’s Google Ads. There’s e-mail marketing. There’s Facebook Messenger. So it’s definitely evolved over time. I wouldn’t say the organic is a big thing to me now. You’re absolutely right that it could become a liability, there could be algorithm shifts. So that definitely has shifted over time, but that was initially what I looked for just because it’s free paid traffic, right? That’s one way I value the businesses. If it’s getting 10,000 clicks a month on socks, and if you look on PPC to how much socks cost, let’s just say it costs $2 a click, that means, you know, I’m getting $20,000 worth of free traffic every month. And that’s how I initially was valuing businesses, is, you know, how do I come up with the valuation for that.

Red Flags To Watch For

Andrew: What little things do you read into during that process? I mean, we do all that. The due diligence process and what to look for, it’s pretty involved in a month, I would imagine. But, in a high level, are there little things that you read into that you found are either a really good sign out of the gates or a big red flag? And it could be anything from the attitude of the owner to the books, to the broker, to the niche. What things do you read into that people who are just getting into this might not read into as much as they should?

Shakil: Financials is a big thing. There’s gonna be add-backs that the broker or even the seller kinda adds back to that. Necessarily isn’t an add-back. For example, the owner’s salary, that’s an add-back, that’s fine. But maybe there’s another employee that’s part-time. They may consider that an add-back. They may add back failed Facebook strategies. So if I spent, you know, $100,000 last year, and it was unprofitable, some brokers may even add that back. So, you know, those are big red flags that I stay away from.

Another thing is the owner itself, right? Is the sale being driven because of the technical knowledge of the owner, right? So I was looking at this car parts business for sale, and the guy was a mechanic, and he was naturally a salesman, too. There’s no way I could replicate that. It would be very hard to get a business manager and replicate something like that, too, right? I would think, you know, a business would fall because of that. So that’s another thing, is seeing how much technical knowledge the owner has and how much can that be transferred over. Financials, like I said, was a big thing. I think those two things really stand out to me first before I even dive deeper.

Tips on Making an Offer

Andrew: When you go to make an offer, do you have a way you typically proceed, or does it vary based on the deal? And I guess what I’m really asking is do you tend to go in with an offer that’s 10%, to 20%, to 30% lower than asked? Do you tend to kinda take the mentality and approach of, “If this is a great business, I’m gonna give him a pretty reasonable full priced offer and not fight over some pennies to save, the expensive dimes or dollars”? What are you thinking about, and how aggressive are you with your price and your terms when it comes time to make an offer?

Shakil: Initially, I keep very loose terms. I mainly base it on the asking price rate. So it really depends on the deal itself, but I would say a general rule of thumb is you could get at least 10% off asking price. And it really depends on who else is bidding against you, right? If you lowball, the broker will not take you seriously. They’ll probably not even entertain you anymore. So I usually do at least 10% to 15% off asking price, and I usually see how the broker comes back. The broker will usually tell you, “Hey, you know, thank you for the offer, but you’re still not the highest bidder.”

If I really want the business, you know, I’ll tell a broker, “Look, I really want the business. I’m an eCommerce. I think I could grow this business. What can I do to get this business?” Usually the broker may or may not work with you, but that’s where you build that relationship with the broker, too. You build that trust with them. You know, you show them that you’re well-versed in the business. They also look at if you have money. If you could give an all-cash offer, you will probably get the deal, you’re more favorable to get the deal versus other people.

Andrew: I imagine, given your track record, having done this for five years, making, you know, a dozenish acquisitions, building that reputation with the brokerage firm or even individual brokers, that’s gotta be a huge at least somewhat of an advantage, because they can go back to their client and say, “Hey, you’ve got offers from five people. We don’t even know three of them. Number four seems great, but they don’t have financing. But number five is this Shakil guy. He’s played favorably with us in the past. He’s come through. He’s reasonable.” And even if you don’t come in with the absolute top dollar price, that’s a big deal when you’re considering and trying to, you know, consummate a, you know, 30 to 90-day closing process, I guess. Is that fair?

Shakil: Yeah, absolutely. I mean, I think I do definitely have an edge because of my experience. Remember, these sellers that are selling their business, they have planned for the last three to six months to get to where they are, right? They’ve had to fix their financials. They had to streamline their operations. You know, they’ve gone through anxiety, and I’m sure their anxiety levels are pretty high when they’re trying to sell their business. This is their baby they’re selling. This is everything that they’ve put their sweat equity into, right?

So this is where I come in, and I calm them down and say, “Hey, look, I’ve gone through this before. I’m not gonna nickel-and-dime you on the financials.” You know, “I’m not gonna ask you all these, you know, questions. Let’s just get the deal done.” So I think through that experience it definitely helps them more and allows me to have a lower asking price, because I’m able to close quicker and also just not, you know, dig around too much in due diligence either.

Financing New Ventures

Andrew: With financing, how do you look at that? You had some great post in the form of SBA loans. I’m thinking through those. And, as a general rule, it sounds like you’ve financed most of these deals. How do you do that? Is it through SBA loans? The tricky part about those is those can be… There’s a lot of red tape and paperwork given the fact that a lot of traditional banks just don’t even understand how this kind of deals, especially on the eCommerce side, work. What does your financing look like, and how do you finance most of your deals?

Shakil: Yeah, you’re right. I do finance most of my deals. I do a lot of financing. I think that’s where you really make more money. You know, essentially, if you’re buying at a 3x multiple, right, that pretty much means you’re getting a 33% return on your money. If you could borrow at 5% and make 33%, that always makes, you know, sense. You know, that’s a very simplified version of that. I usually finance through, you know, smaller banks. I’ve done an SBA before, I’ve done unsecured loans, I’ve done a personal loan through the credit unions, and I’ve done owner financing. So it really just all depends on the deal itself, but, yes, I definitely usually like to borrow on a deal.

Andrew: You mentioned one of them all. You said you did a personally guaranteed loan. The experience I’ve had with people financing deals, almost all of them actually had to seal that. I’m guessing the individual deals you do, in my experience, they have to be personally guaranteed. How do you set up… Talk to me about how if at all you’re able to get financing from banks without having to provide a personal guarantee.

Shakil: Yes. Those are the unsecured loans. I was able to get twice already 60% financing. So I only had to put down 40% on unsecured loan. It’s for five years, but that really depends on your credit, and it depends on the business income, right? So, if the business income is more than enough to pay the debt off every year, then you’ll look more favorable to the bank. If your credit score is high, you’ll look even better.

Andrew: That’s amazing. So, just to clarify on security, if for whatever reason that business wasn’t able to service that debt, the bank would not have recourse. They could come after the assets of the business, but personally they can’t come off to your house or your personal assets outside of that business. Is that… And that you were able to get that with 40% down.

Shakil: That’s correct. Yeah. That’s correct.

Andrew: Wow.

Shakil: And it’s happened twice, but the more you do this, the less likely you are now of getting financing. So I think I’ve definitely thinned myself out, but, yes, there is ways, and some banks will do that for you.

Befriend a Banker

Andrew: Do you have a relationship… I imagine, just like on the broker side, when you build rapport and relationship, it’s helpful. Do you have someone at one of those local small banks that, you know, he or she sees you coming, and you sit down, and they say, “Oh, Shakil, what kind of business is it this time?” They trust you. They’ve seen that, you know, you’ve been able to pull this off a number of times, and getting financing is much easier now. Or is it kinda ad hoc, start from the beginning every time?

Shakil: It is. It is actually start from the beginning all the time, because I think banks have different rules and regulations, and different quota, and stuff that they have to reach, and stuff. So it depends if I can get them at the right time. So I do just like, you know, brokers I keep a relationship with. Same with bankers. I try to keep a relationship with many of them, and once I’m ready for a deal, you know, I send an e-mail to all of them saying, “Hey, look, I have this deal. I want it. Can you guys give me financing?” And, you know, I’m hoping one of them actually say yes. But I do work with many of them. It just depends on who’s willing to give me the loan and at what rate.

Non-Secured Scares

Andrew: Have you had any deals where you’ve gone through, you’ve financed them, they haven’t been non-secured, the business has blown up, and you’ve been on the hook for the total amount? Has that happened, or has that not been an issue?

Shakil: It has not happened, but it became very close where sometimes I didn’t have any money in the bank to pay those loans off, and so I had to borrow from other businesses. But, luckily, it was only for a couple months, and I haven’t had any long-term issues. Again, when you finance, you’re taking on a bigger risk, and to mitigate that risk, you have to look at growth opportunities. Are there really some low-hanging fruits that you can actually implement that will help grow the business? I’m not gonna buy a business at a 3x expecting to make my money back in three years, right? I’m buying it at a 3x so I can make my money back in two years, is the goal. So I think that’s one way to really mitigate the risk, is if you’re gonna take on financing, make sure you have some actionable items that you could implement to help grow the business.

Streamlining The SBA Process

Andrew: Any tips for people on streamlining what can be a very cumbersome SBA application and approval process?

Shakil: Oh, man. Oh, man, SBAs. They are…

Andrew: We have four hours. If you need it all, we can use it.

Shakil: Oh, man. They ask a lot of information. Just have your tax returns ready if you’re gonna go for an SBA. The one thing I would recommend you do is ask the seller to provide their business tax returns. I was once looking at a business for sale, and, you know, it was a fairly larger deal. I think it was asking $1 million. It was making $350,000 on the prospectus, right? I placed an offer, take it to due diligence, and, you know, I told the seller from the beginning, “I’m gonna do an SBA on this.” He said, “Yeah, that’s fine.” I told him it’s gonna take at least 60 days, and he said that’s fine, too. You know, the bank was like, “Can you give me their tax returns?” I give them their tax returns, and their income shows $60,000 instead of the $350,000.

And the reason why it was so low is because, you know, one way or the other, you know, obviously, on your tax returns you’ll try to pay the least amount as you can, you’ll do write-offs and stuff. But he had some red flag write-offs. And the bank told me, you know, “I’ll do some add-backs, but you’re only going to get a $200,000 loan.” And, for me, you know, I was expecting at least, you know, $700,000 loan. So, you know, definitely ask the seller for their tax returns to make sure it matches or closely matches the prospectus income.

Have your three years tax returns ready. Have a conversation with the bankers saying, “Hey, I’m gonna be bringing a deal to you. What is everything that you need to have?” SBAs also require a life insurance. So just, you know, be aware of that, and then, you know, they ask a bunch of documents. But definitely, you know, educate the buyer or the seller that, “Hey, it’s gonna take a little longer, but bear with me, because I want this deal.”

Doing Your Due Diligence

Andrew: Let’s say you make the offer, you’ve got the financing in place, and you’re in diligence, or the financing is pending. What do you… On the diligence side, two questions. Let’s say it’s a 30-day diligence period. How much of your time are you actually doing diligence? Is this a 40 hours, 50, 60 hours a week process for a month, or you’re just diving in…it’s a 100% of what you’re focusing on? So how involved is it? And then what are, you know, let’s say the two or the three biggest things you are looking for when you’re turning over rocks to potentially make sure that you’re buying what was represented?

Shakil: Yeah. Well, initially, I do… You know, the due diligence is usually 30 days. The first week, you know, I’m working, you know, 40, 50 hours definitely uncovering the business, the financials, the back end, the customers, learning the business. Afterwards, you know, I’ll ask them some follow-up questions and say, “Hey,” you know, “Can you explain this for me? Can you explain that for me?” And, you know, from going on, you know, I’m spending less time on it and more on kinda coming up with the deal structure itself.

But, you know, definitely the biggest red flags I’ve seen is in the financials, you know, sometimes. You know, for every dollar and profit you’re adding on the business, that’s $3 in valuation. So, if you’re showing an extra 10 grand in profit, you know, you’re adding 30 grand on valuation itself. So I definitely, you know, look at the financials itself. Lucky for me, my business partner in my last two deals is a accountant, and he’s definitely helped me out in that aspect. But, yeah, I pay a big attention to financials and the operations.

Smooth Sailing…Sometimes

Andrew: So let’s say everything comes to the day of signing. What percent of the deals do you get to a point where you find maybe some issues that you have to work through and negotiate? In the due diligence period, how many times are the complexities, but when you come to close the deal or as you’re getting closer to it, how much the time is a pretty smooth sailing?

Shakil: Well, I would say half the time it’s a smooth sailing, half the times it’s not. It’s hard to really get down the terms down. You know, asking price is one thing, but then getting the terms down is another thing. So even asking 60 days from the seller to help out with the business, you know, they’ll say no. You know, “I can only do 30 days. If you want me for the other 30 days, you’re gonna have to pay me $200 an hour.” You know, so you have to get those terms down. A little hiccup we had in our last deal, was cardsforcauses.com, is there was a trademark that was very similar to Cards for Causes.

And we had just recently learned about it, because, you know, it’s a fairly large purchase, and I wanted to trademark the name. I started doing some research on it, and I found out that, hey, there’s a word that’s very similar. And so from then on I had to hire a IP attorney to see what the stats were. He recommended that I not buy the deal, or if I were to buy the deal, that if a problem arises in the future, he would pay those legal costs. So then those are some terms we had to figure out. So, yeah, there’s definitely gonna be terms that you need to iron out besides the asking price.

Trusting Others To Make Big Decisions

Andrew: So you’ve got that all taken care of. You hopefully close the deal. We covered a lot of that, you know, what you do from closing, everyone on board, bringing on the managers before so they won’t delay on that too much. Stepping back a little bit as we’re getting close to closing here, what are some of the biggest complications that pop up with your model? We’ve touched on some of them, but at a high level I was almost thinking about doing this. What part is gonna frustrate them the most about this entire process that to succeed you really need to be able to just solve that problem or a small set of problems?

Shakil: I mean, I think it’s definitely not taking on a hands-on approach. I am pretty much trusting my business managers to run the day-to-day operations. They’re doing bulk of the work right there. If you don’t have a good business manager, your business will probably tank. You know, I think my business is as good as the people I hire. If you don’t have trustworthy people, your business may not do well. It’s really hard to trust someone to run the day-to-day operations. Especially when you’ve purchased the business, you’re looking for the quickest return. Especially when you have financing, when something goes bad, you know, they could come after other assets. So I think that aspect of it makes it a little risky, but that also allows me to grow businesses. So, I mean, I think, you know, having a good business manager is, you know, one of the most important things you should have in the business.

Deciding to Keep an Owner On

Andrew: Have you ever explored investing in existing eCommerce businesses that are run by owners versus buying them, acquiring them, and putting the team in place? I know you’ve had an experience where you bought a business and kept the owner on for a while. Maybe you can share that experience if you wouldn’t mind, but then also just your general thoughts on, you know, why not approach existing owners and invest in them versus trying to go through all the work of acquiring something and then bringing somebody on and teaching them.

Shakil: Yeah. So if I were to keep the old owner on… Remember, these guys have been running the business for five years, five, six years, or whatever years they’ve been working on. They have been doing it a certain way. I’m coming in, and I’m saying, “All right, let’s change this up, change that up.” You know, people don’t like changes when they’ve created something. So we’ve definitely had some problems there, and that’s where my problem came with my partner, was when you partner with someone you don’t know, you’re pretty much marrying them, right? You’re gonna see and talk to them every day. You’re gonna have problems with them. You have differences, so do they. If you’re not able to work together, there’s definitely gonna problems.

For this particular company, I kept the owner on, because he was really good at marketing. I bought this business, and one of the things he said to me when I was doing due diligence was, “Hey, Shakil, you know, I stopped the Google Ads, because I was getting too much traffic,” and my jaw just dropped. I was like, “Did you really just say that? You stopped your ads because you were going too much traffic?” And he said, “Yeah. You know, I don’t like dealing with customers.” And I said, “Well, that’s good. You know, I like customers. I could do that front if you could carry on the marketing.” Things went well the first year.

You know, lucky for me, I was able to make my money back in six months, and, you know, it was a really, really great deal. Second year comes around, and he feels a little taken advantage of, and he wants more equity, and he wants to do this and that, and that’s where we kind of broke off. That’s where our goals started misaligning. You know, when things are well, everyone’s happy. When things go bad, that’s where people, you know, really show their colors. And, unlucky for me, we did not have any operating agreement in place. So he pretty much just said, “Look, I’m just gonna collect a check, and I’m not gonna do anything anymore.” So, unfortunately, I had to buy him out at a little bit of a premium. Yeah, there’s gonna be those problems there, and so that’s why I prefer not to keep the old owner on, because they come with a different mindset. They’ve worked on the business. They’ve grown it in a certain way. They may not be open to the way you want to grow the business.

Shakil’s Favorite Business Model

Andrew: You know, Shakil, I may have a last question here before we jump into the lightning round. You’ve looked at and purchased a wide variety of models of businesses, Amazon businesses, drop shipping, private label, affiliate. Which one of those is your favorite? Obviously, you know, in eCommerce a lot of people are listening the same, and it can be easy to just continue to do what you know and not consider alternatives. But if you could just have wonderful deals of a certain type of model fall on your lap all day long, which model would it be?

Shakil: Custom products. I love custom products. I love, you know, creating something for the customer and then them placing the order. I love investing in technology where they’re able to build that product on our website and order it. I think there are higher margins, I think there’s less competition for that, and that’s the way I’ve been going to.

The Lightning Round!

Andrew: Very cool. Shakil, this has been phenomenal. Thank you for sharing all this stuff. It’s something I… It’s so fascinating to hear how you make this work and your thought process behind it. Wrapping up, but, first, I wanna do a lightning round with you. I just have a handful of questions that, you know, of course, like the name implies, feel free to answer quickly off the top of your head. So the first question is, if you had to identify the number one thing you’re trying to optimize your life for right now, what would it be?

Shakil: Optimize something in my life, time. Time is the most valuable thing to me.

Andrew: Who’s someone you strongly disagree with?

Shakil: Who do I disagree with, oh, Trump. My man, Trump.

Andrew: My man, Trump. How much money in the bank is enough? What would be your number?

Shakil: I would say $50 million.

Andrew: And what’s the worst investment you’ve made in the last 10 years?

Shakil: I invested $100,000, part of a VC fund, in a donation platform. Three months later, I ran out of money, worst investment ever.

Andrew: Was it on a rough day?

Shakil: Yeah. Oh, yeah.

Andrew: And then what’s the best investment apart from your business or your business portfolio that you’ve made in the last 10 years?

Shakil: I would say getting my MBA. That was a good investment.

Andrew: Finally, what was the first CD you ever owned if you are brave enough to share us with it?

Shakil: CD, I think in the ’90s he was called Puff Daddy at the time. Now, he is called P Diddy.

Andrew: Love it. Oh, awesome. Shakil, well, so this has been phenomenal, hearing how you do this. You’ve been wanting to come in and share the secret sauce and what you do behind the curtain. Thanks so much for being willing to talk about it and for being a part of the community. I’m looking forward to hanging out with you in Laguna, man.

Shakil: Cool, man. See you soon, Andrew. Thanks a lot for having me.

Andrew: Want to connect with and learn from other proven eCommerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight-knit vetted group for store owners with at least $0.25 million in annual sales. You can learn more and apply for membership at ecommercefuel.com. Thanks so much for listening, and I’m looking forward to seeing you again next time.

Imagine if you could clone yourself. Think of how much more you could get done with your business. And how many drinks with pink umbrellas you could enjoy as your clone worked tirelessly in the background. A pipe dream, obviously. But you can get close to this fantasy by hiring a business manager who can [...]

And not just with one manager. He’s hired close to a dozen business managers that oversee his portfolio of businesses which allows him to focus on things he enjoys more, like finding and acquiring his next portfolio company.

(And, of course, crushing everyone at the last eCommerceFuel Live pickup basketball game. We’ll save that for another episode)

In today’s discussion you’ll learn:

How to create compensation plans for managers to align their interests with yours

What Shakil expects of them and how he manages them on an ongoing basis

How much you need to pay to acquire the caliber of person needed to succeed

Andrew: Welcome to the eCommerceFuel podcast. The show dedicated to helping high six and seven-figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow e-commerce entrepreneur, Andrew Youderian.

Hey, guys. Andrew here and welcome to the “eCommerceFuel” podcast. Appreciate you joining me on the show today. And on the program I’ve got Shakil Prasla, who is the owner of szventures.com, where he owns a portfolio of a dozen-ish e-commerce stores that he has purchased, acquired over the last five plus years. And originally, I was planning on just having this be a single episode about his experience and his thoughts and lessons learned, but so much good stuff came out of this discussion and I kept diving down at a rabbit hole after rabbit hole that I broke up into a couple episodes because there’s so many nuggets in there.

In the first episode, we’re gonna talk about how he effectively manages his portfolio, specifically by hiring effective business managers. And for a guy who tends to be a little bit obsessed with control, one of my faults, I was really curious to see how he did that, how he finds his managers, how he trains them, how he manages them, and incentivizes them. And he’s really been able to scale his abilities beyond just himself in a way that a few people, even given the broad scope of entrepreneurs in the community that eCommerceFuel have successful done. It’s a hard thing to do. But he’s been to do across a wide variety of business, and do it very effectively with very minimal turnover, which I thought was impressive.

So, next week, we’re gonna talk more about his process from a macro perspective, how he finds deals and finances them and his thoughts and which types of deals and business types he finds the most attractive and interesting. But today, we’re gonna focus really on his team management and particularly on hiring and managing great business managers. So, I hope you enjoy the discussion. I’m gonna go ahead and get us right into it.

For a long time I’ve thought like you’ve got a really cool story of…The model is interesting. You’re a great guy, just kinda in general, so I’m glad that we were able to make this happen. Thanks for being willing to do it, buddy.

Shakil: Cool. Cool. Yeah.

Shakil’s Company SZ Ventures

Andrew: Shakil, so what is SZ Ventures when you meet someone and they have no idea or they don’t know you and they ask what you do, what do you tell them?

Shakil: Well, I tell that SZ Ventures is a holding company I created that buys online companies. And I basically got the name by putting my first initial and my wife’s first initial and put that together to create the SZ. That’s the SZ Ventures.

Andrew: And how long have you been doing this for?

Shakil: About five years. I got started in e-commerce in 2012, and I made my first acquisition in 2013.

Andrew: And how many different companies do you own under the SZ umbrella?

Shakil: There’s 15 companies now underneath SZ Ventures.

Andrew: That’s amazing. And structurally, do you have it set up with…Probably we’ll do a whole different episode on this, but legally how do you have that set up? There’s advantages to having legal entities for all your different companies, there’s also some advantages remarkably on the simplicity side for having, you know, SZ as the parent and then having like a DBA for all of your individual businesses. How do you structure that legally?

The Structure of 15 Companies

Shakil: Yeah. So I’ve created them all individually as LLCs. And then whenever I acquire them, I don’t acquire them as individual known as Shakil. I purchased them through SZ Ventures. So SZ Ventures is an LLC that buys into the new LLC.

Andrew: So everyone in your company has its own LLC. Do you have individual bank accounts set up for all of those businesses as well?

Shakil: Yeah, that’s correct. I have different bank accounts, different credit cards, different tax returns. Definitely every quarters gets a little messy sometimes, but I have a good accountant that helps me out.

Andrew: So you file 15 different tax returns for each business every year?

Shakil: Yeah, that’s correct.

Andrew: Wow.

Shakil: It just sounds a lot, but I’m so used to it now with the whole process of creating LLCs, bank accounts, and credit cards that, you know, it doesn’t scare me.

Andrew: And when you have it set up, we’ll get into maybe the details more about how you structure things, if you bring people on the equity side. But do you have for that structure? Are you the sole owner of most of these? Do you have investors? Do you have people running the business also have an equity stake? Kind of at a high level, what does that look like?

Equity Stakes

Shakil: When I first started acquiring companies I was buying them individually just by myself, but recently I’ve been having partners join me as well. So the last four companies I’ve had a partner going with me.

Andrew: And when you say partner, are they usually on the operational side or they’re usually just as a financial-limited partner, where they provide the cash and you manage everything else. The mix of the two?

Shakil: They’re active partners, so they help manage the company. They help, you know, with the day-to-day activities.

Andrew: Great. And when you bring those partners in, do you require them to bring a capital as well as being somebody who runs the business? Or, have you at times just brought someone and give them an equity stake just for running the day-to-day?

Shakil: Yes. So I’ve tried both. I’ve tried it to where they don’t have to bring any cash upfront or minimal amount, and they get equal equity stake. In return, I ask that they do the day-to-day operations. I stay a silent partner. And I’ve also tried it where we both bring equal amounts and we both have equal partners with, you know, equal say and equal time, you know, going into the business.

Andrew: And do you have a preference for which one of those works better or a little bit down the line you prefer if you…Is it situational where it works both ways or is there one that you have a strong preference for?

Shakil: Well, it depends on the business, too. But if I’m investing most of the time, there’s more risk on me. The upside to that is I don’t have to put much time into the business. It could pretty much become a passive business model which one of them has become. The other side, you know, we’re both putting an equal amounts of money, so we both have equal risk, or we have equal say. That has its pros and cons as well, too.

Andrew: You mentioned you have 15 different properties or businesses over the course of about 5 years. Obviously, you kinda went through all of them, but can you give people listening maybe the examples of a couple different types of businesses that you run and own in that portfolio?

A Diverse Store Portfolio

Shakil: Yeah. Well, I’ll start from the most recent one. I purchased a greeting cards company in July and we pretty much make custom greeting cards. You could pick your verse and it goes on the inside. You could pick your design on the outside. I make custom socks. So, you know, for baseball teams, for corporate companies. We make also custom paddles, ping-pong balls. I sell cuff links and tie clips, leather jackets to fitness gear. And then, you know, my custom metal promotional products is a big one, too. I guess I’m everywhere.

Andrew: Very well diversified across verticals. What does your team look like right now? Maybe at a high level, can you give me a sense of your headcount and the split on the headcount between the people that are payroll and people that are contractors?

Shakil: So, overall, I think, I have about 40 people now, 40 employees. And the way I’ve structured it is that the smaller ones have a business manager so that, you know, for the smaller ones the business manager may manage three or four companies. For the large ones, I have one business manager for each of the larger companies. And then underneath them is customer service team. And, you know, some maybe contractors and some maybe employees. For Facebook ads, for Google ad, for SEO, I used agencies for those.

Andrew: So outsourced on the advertising side. But your customer service and the people that are, kind of, your point man or point woman for each business, those are people that are on your payroll?

Shakil: Correct. And most of them aren’t based in the U.S.

Andrew: Wow. So, how much of your time is spent dealing with people, HR issues, management, people quitting and bringing new people on? All the stuff you have to deal with when you have 40 people on your team, in my world, that’s a big team, versus the other things that you do. Is that just a tremendous amount of work or have you figured out a way to manage that fairly streamlined manner?

HR Falls on Business Manager’s Lap

Shakil: Well, I don’t think I figured it out, but, I think, I’ve had good employees where my turnover has been very low. Usually, with the hiring and firing, I let the business manager deal with that one. And if the business manager needs any help, I deal with that. But I try to stay away from, kind of, the hiring and firing of the employees. I let the business manager deal with that.

Andrew: So when you have the business manager on that, they deal with a lot of the personnel issues. How do you structure managing? Because, let’s say, I’m guessing you probably 8 to 10 business managers, either that are managing multiple properties or one. That’s a lot of people to manage in addition to all the other things you have to do. What is your process for dealing with that? And what kind of maybe rules or heuristics or framework do you have in place to be able to manage that team well?

Is it do you have set calls and you only talk to them in that time or you’re pretty much available throughout? Is there a task manager project that religiously you use to make that easy? How do you bring order to that? Because it sounds like it could get chaotic pretty quickly, even when you had the people managing the individual businesses.

Task Managing For A Big Team

Shakil: Oh, absolutely. If it’s not organized, if it’s not streamlined, it could definitely get crazy. For most of these employees, I use Hubstaff to monitor their performance, to see how they’re doing, to see what they’re doing. That’s a good way to see what they’re doing day-to-day. For communication, we use Slack often. So if there’s any questions, any comments, any disgruntled customers, they will post them in Slack for me.

As far as, like, goals, and I’ve very goal-oriented for weekly, monthly, and yearly goals, I basically come up with three to four goals and that’s it. You know, so we work on those three to four goals. Let’s just say we wanna get to X amount of revenue, so now I work backwards. How do I get there? Which keyword should we focus on? Where should we improve on? Should we list it on Amazon? How do we optimize?

And we keep working backwards until we get actionable items. And I basically create a Google Docs of these action items and with due dates. And I have a weekly call with my business managers on the process or the progress of where they stand. And we’ll fine-tune it to see, you know, how it’s going, to see what’s the update, what else we can do to reach those goals. But, ultimately, it just comes back to, you know, getting to those few three to four goals, you know, implementing on that and executing on that.

Andrew: What was the tool you said you used to kind of monitor the performance of your managers?

Shakil: Hubstaff.

Andrew: Hubstaff. And so for people that are familiar with that, can you talk about what that does and how you implemented it?

Shakil: Yes. So if people have used AppWork as well, it’s basically a tool where you could pay your employees as well. It monitors their key strokes, how much they’re typing every 10 minutes, their mouse movements, you could also see their screenshots on what they’re working on. That’s basically what I use it for, is to see how efficient they’re being. I also use HelpScout which is a email system where you could check how quickly my customer service reps are answering, how many emails they’re answering a day. So it’s a pretty good tool, really, to just see how efficient they’re being, how quickly they’re answering, and really what my customers thing about my customer’s service reps.

Andrew: So just to clarify, you use Hubstaff to kinda manage and kinda monitor the progress of the managers for your individual companies as well, not just like the customer service and people below that. Correct?

Shakil: That’s correct. I use it for my business managers as well as my customer service reps.

The Hands-Off Tradeoff

Andrew: You know, that’s something that’s been tricky at all because you always have…We’ve had some interesting discussions in the community about that tradeoff between managing your team and providing freedom for people not, you know, being too much of authoritarian, big brother boss, and kind of the tradeoffs there. Is that something that works pretty well? Do you feel like sometimes your managers, especially those that maybe have a profit share and equity stake, they resent that? Has that caused problems or have you found overall it’s been something that’s been invaluable? Have you wrestled with that at all?

Shakil: I haven’t had a problem with it because I also don’t look at it very closely either. They’re able to do what they want to do freely. I’ll only step in when I see a decline in our customer reviews or decline in the way we’re answering. Other than that, they’re pretty much free to do what they want to do.

Andrew: Because it sounds like for you it’s a safeguard to check on stuff and you have really good feedback systems in place that will trigger you when they issue those reviews. Is that kinda how you operate?

Shakil: Not exactly. That’s how it is set up.

Feedback Systems for Employees

Andrew: Talk to me about how that works. So you mentioned customer reviews, could you maybe give me, at a high sense, what are some of those feedback loops, and maybe dive into those a little bit? You mentioned customer reviews, you mentioned the goals that you’re working toward. Are there any other ones that you use, any other really KPIs or feedback loops that are super important? What are the top ones that you look at?

Shakil: Yes. So my main ones are really how quickly they’re responding to customers. So on Help Scout, you’re able to see how quickly, when an email comes in, how quickly they’re answering those emails. The customer themselves could rate, you know, “Was I happy with this response? Was I not?” We’re able to see that as well. So I look at that feedback.

Besides, those two things I also look at Hubstaff here and just to see if, you know, how efficient they’re being every 10 minutes. Are they, you know, are surfing the internet? Or, are they actually answering emails? That’s a good way to really see if my customer service staff even my business managers are doing what they’re supposed to be doing.

Andrew: So is most of your team…I’m sure that customer service staff is probably on an hourly basis. Are most of managers on a hourly basis as well?

Shakil: Most of them are actually salary with some type of bonus or equity tied to incentives.

Andrew: When you hire someone, and maybe it’s a good transition to talk about how you hire those people, what is your mindset with that? Are you thinking, “I’m gonna bring someone as someone who can be….if they’re not in equity partner, at least they’re gonna have some kind of incentive in the growth of the business.” And do you expect them to come in and meaningfully grow the business over time? Or do you see your role really as someone to come out, acquire the business, fix some of the systems, streamline it, and then put someone in place who can really manage it well from a day-to-day, but not necessarily grow it?

How many growth expectations or what are your realistic growth expectations for bringing somebody on in that kind of role? Because that’s how hard finding someone who can meaningfully grow the business, you know, that is not someone who has a huge equity stake or that is highly, highly managed. That sounds like that’s a trick thing, at least in my experience, to find.

How to Hire Great Managers

Shakil: Yeah. Well, the type of managers I try to look for are people that already have some type of management experience. They come with some type of leadership experience. They come with some type of marketing experience or some kind of developer experience, and they’ve had, you know, this position before. I try to leverage their experience and put that into the business, right?

So when I buy a business, I usually keep the old owner on, at least, you know, 60 to 90 days, learn from them, transfer that knowledge to this business manager, and see what we can keep as a strategy as a strategy and what new strategies we could implement. It’s really the first six months where we really work together, come up with manuals, processes, and just procedures on what we can implement going forward. So it’s really, I rely on the business manager on how to grow the business and how to execute on it. Really, I have full trust on them. And if things don’t work out, I’ll move on to the next manager.

Andrew: So do you make them an integral part of that transition process? Let’s say, you buy a new business, you mentioned of course having the owner involved from, let’s say, I just make it easy 90-day period. Do you have a manage in place before you close on acquisition so that they can be a part of all of the calls, all the processes to see what’s going and you mentor them in that and they kind of push them off on their own? Or is it much more often you acquire, you learn it, you bring someone on it to tail into to that, you train them, and then off the races you go?

Shakil: Yeah, o I usually bring them on during due diligence, right? So due diligence usually is about 30 days. Two weeks into it, I’ll definitely know I want to move forward, I want it at the asking price. At which point, I will ask one of my business managers if they know anyone that’s looking for a job, or I’ll post it on Indeed, or I’ll ask a agency here in Huston to help me look for someone. And usually right after I acquire the company, I’ll also have a business manager in place that’ll learn side by side with me from the old owner on the basis.

Andrew: When you think about finding someone that has the experience and the hustle to be able to execute on what you’re asking, which is really to…Sometimes it’s a lot of autonomy past that introductory and training period. What’s the realistic compensation for someone on this? Is it something that you’re able to find someone where you can get someone who does a really good job for 40K a year, 50K a year or you can have to offer them significantly more of equity upside? And, obviously, this is gonna vary based on, you know, the complexity of the business or if they’re managing three or four versus much bigger one. But on average, what do you need to give to find someone who can be a success in that role?

Incentivizing Employees

Shakil: Yeah. I mean, I offer them at least $60,000 a year, and that’s just salary. And then there’s other incentives, too, right? So if I buy a business that’s doing, you know, a million dollars in revenue prior to my acquisition, we’ll come up with something saying, “Okay, if the business goes to $1.2 million in revenue, you’ll get a X percentage of that, and that’s your the incentive.” So it’s now their drive to grow the business because they’ll be paid even more now.

Andrew: Incentives are always tricky to set up, to do it right in the way that benefits everybody. Do you set those up purely based on top line revenue, which can helpful for growth, but perhaps maybe people would choose the revenue at the expense of profitability? How do you set up those incentives so that they work well for both you guys in the long term?

Shakil: Yeah. I would say it’s a combination, really, of revenue and profitability. So if it does $1.2 million in sales, you’ll get this X percentage, but if it also profits this much, you’ll get even more of that percentage. So I kinda keep it in conjunction with each other. It works out.

Andrew: What percent of managers that you bring on work out, let’s say, a year down the road? Is this something you circle through a lot of people to find the people that really fit, or have you gotten down to the point where you are pretty good at people that work out well?

8 Out of 9 Are Good Odds

Shakil: I have nine managers. Out of the nine, I would say, only one has not worked out. The other eight are stellar. They’re amazing. They do a great job. The one that didn’t work out, you know, when I hired them, you know, their resume looked great, their experience looked great. Their goals were not aligned with what I wanted to do. So, you know, we butted heads a lot. That showed in the way things were being executed. And so, I think, when goals are not aligned that creates a lot of problems. So, I think, you know, from the get-go that has to be established that, “Hey, let’s work together on this. You’re not my employee, you’re my partner. Let’s go. Let’s get this done.”

Andrew: Maybe unpack that a little bit more because 9 out of 10 or 8 out 9 batting successfully for a role like this, which is much more sophisticated and far-reaching than just a customer service rep. That seems really impressive to me. I would have imagined there’ll be a lot more turnover. So, dive into that a little more, if you will. How do you, maybe starting with the goals that you mentioned, what kind of questions do you ask about goals? What kind of red flags do you see about goals to make sure you’re on the same page and your long-term visions are aligned, and what you want are aligned? Because obviously it’s working well for you. Talk to me a little bit more about that.

Shakil: Well, I make the goals with feedback from the business manager, right? So when they come on board, day one of acquisition, we learn the business, we look at growth opportunities and we say, “Okay, we could achieve this. We could get to X amount of revenue. We can target that keyboard. We can upsell this product, then we could get to this.” We really work together for the first 60 to 90 days. Come up with those goals, and then from then one we break it down on what to do next. You know, I definitely, definitely give freedom to these business managers, and I try to empower them as much as I can.

You know, initially, they’ll come to me with a lot of questions, and I’ll say, “Look, answer it the way you want to. Run it the way you want to. Execute it the way you want to. If there’s any feedback you wanna bounce off me, let’s do that. But this is your boat to go to and you do it the way you want to.” So I definitely give them a lot of freedom to do that and, luckily, it’s worked out pretty well for me.

Screening and Training Periods

Andrew: What about…maybe not, the goal sounds like it’s something once you’ve brought somebody on or maybe laid in the hiring process. So you identify a good lead that you talk about to make sure you’re on the same page. What do you do early on to screen candidates? You mentioned looking for people with marketing experience or development experience. But do you have any tricks on processes for things that you put in the job listings, ways that you write it, really important questions you ask during the interview process to help you find these managers that can be very autonomous with a little training period?

Shakil: Well, it’s funny you should look in. My job listings are very basic. I’ll say, “The roles and responsibilities, this is what we do, this is what I expect out of this business manager.” Just those three things. You know, and the follow-up question I’ll ask them in the first round is, you know, “What do you think is it that we do? How do you think you can grow the business?” And this is before I’ve even, you know, interviewed them or anything. With the resume, I also ask for the cover letter which asks these question of, you know, “How can you grow business? What value can you add to my business? Based on your experience what can you do for my company?” Just based on those five, six question I’ll see if I want to bring them on for interview. And if they’re not in Huston, I’ll Skype them and get to know them a little bit better, talk about my company more, talk about some high level goals I have and see if they resonate with those goals as well.

Andrew: What do you have…I mean, you mentioned people that are developers and people who have marketing experience work well. But to be an entrepreneur, I mean, if you were in e-commerce business there’s so many different facets to that. There’s the marketing side, there’s the technical side, graphic design. I mean, we could probably sit here and brainstorm a dozen different hats that you need to have. And to be honest, few people will have all those hats. As an owner, the one thing that, you know, drives you to learn all of them or at least to be able to get knowledgeable enough with them or outsource them well is that you own the business. How do you deal with that with…let’s say you bring someone who is a phenomenal developer but they know nothing about marketing, do you have any roles and what roles do you have at your, you know, under SZ that are shared across all of your companies? Like do you have a graphic designer that’s on staff that everyone has access to, or do you have a Shopify to have that everyone has access to? What roles or responsibilities do you find have been important to institutionalized or have a contractor that everyone can tap into? You don’t expect them to have coming on board.

Shakil: Yes. So as for a lot of my custom products we use my graphic designer and they work across the board. But as far business managers or customer service reps, they pretty much work on those individual companies themselves. I do have developers that we share across the board as well. That’s basically about it.

Andrew: Yeah. So the big ones that you share are graphic design and developers. Also the two big areas that you kind of have everyone gets access to and some core people at the team.

Shakil: Yeah. Exactly.

To Be Continued…!

Andrew: Hey, it’s Andrew here jumping here outside of that discussion. Like I mentioned at the top, we’re gonna go ahead and continue this discussion next weekend and move from…really focusing on how you hire good business managers to discussing more of Shakil’s experience with a process of identifying, finding, and bringing new companies into the folds of his portfolio. And that’s something we’re gonna in depth next week on the show. So make sure to tune in if this was something that interested you.

That will do it for this week. But if you’re not a member of the eCommerceFuel private community and you’re a store owner with at least a quarter million dollars in sales or have really deep experience in e-commerce space, come join us inside our private community. We’ll love to have you. We’re a community of a thousand experienced in the trenches entrepreneurs and professionals that are doing this stuff on a daily basis. We vet all new members to make sure they are highly qualified and a great fit. And it’s a great place to talk and connect with people like Shakil, people that really know this stuff inside and out.

So, if that sounds interesting to you, if coming to some of our live private events sounds interesting to you, or you just want to be able to tap into our very deep achieves of years and years and years of discussions and content on topics just as like we talked about today, you can learn more and apply for membership in the community at eCommerceFuel.com.

That’s gonna do for this week. Thanks so much for listening. I’m looking forward to chatting with you and picking up the discussion next Friday. Have a great week.

Want to connect with and learn from other approving e-commerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight net vetted group for store owners with at least a quarter million dollars in annual sales. You can learn more and apply for membership at ecommercefuel.com. Thanks so much for listening, and I’m looking forward to seeing you again next time.

This Fall we hosted “ECF Week”, where community members in 20+ cities across the globe got together to connect. I couldn’t make all the events but I did my best and joined 8 meetups in 9 days. It was a roadtrip and the likes of which I’ve never attempted before. My itinerary was: Bozeman -> [...]

Andrew: Welcome to the eCommerceFuel podcast, the show dedicated to helping high six and seven-figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow e-commerce entrepreneur, Andrew Youderian.

Hey, you guys. It’s Andrew here. And welcome to the eCommerceFuel podcast. Thanks so much for tuning into the show today, and have a fun adventure episode for you. I’m gonna be taking you on the road with me for what we here at e-commerce will call ECF week for our private community. And that’s when we get as many people as possible around the globe together to meet up locally in person. And we did this in late September, early October. And we had meetups from Dublin, to Miami, to Austin, Texas, to Toronto, to Vancouver, all over the world. In total, I think we had more than 20 meetups, over 200 members met. Got together, broke bread, or had drinks in person. And I couldn’t make all of those but I did my best. I went to eight different meetups in just over a week. Eight meetups in nine days. And I wanna take you on the trip. It was a lot of fun, met a lot of really cool people. And I wanna share some of the stories from the road in terms of people I met, what happened, thoughts on America and Canada, and just the whole experience. It was a lot of fun. So that’s what we’re doing today. I hope you enjoy it, and I’ll go ahead and get into the adventure.

One thing I wanna do really quickly is just, if you guys can fill in as you can see everybody because I’d love to… We have enough people. We don’t wanna get your life stories but I’d love to have to just go around quickly and have everyone introduce themselves.

Kicking Things Off in Bozeman!

So, you see if we could actually officially kick off, at least for me, in Bozeman, Montana my hometown, where we surprisingly have quite a few eCommerceFuel members. Partially because we’ve just got some amazing e-commerce entrepreneurship, partially because I’ve recruited a lot of my friends in the community. But we started at my house, had a great turnout, about 15, 14 or 15 people that came out, I think, roughly. And it was fun. We had someone come all the way from Vancouver, Canada, which was amazing. David, thank you for coming out for that. Actually someone from our senators, it’s Steve Daines from Montana.

One of the cool things about living in a state like Montana is you get to interact with, like someone from the Senator’s office. It was pretty straightforward to get him to come to the event just so they could get to know us, so we could talk to them, about some of our concerns legislatively, and the future of e-commerce and things like that. Anyway, you get to interact with people like that. I can’t imagine that being as easy to do or having someone show up if we lived in California or New York, somewhere bigger like that. Anyway, had a great turnout. It was a fun time hosting it at my house.

Next Stop: Denver

And then the next morning, hopped on a plane to Denver, Colorado. Showed up. And before the meetup I actually had the chance to meet up with a community member and see his warehouse. It was really cool. So I swung by Mason Jar Lifestyle and had a chance to chat with Ryan.

Ryan: Weirdest, oh, man, there’s a lot of competition for that. Just yesterday or two days ago, I got an email from a customer who said, “I love your stuff. It’s great, you know. I love your koozies but…the colors. I mean, coral, mint green, yellow. YUCK, all caps, period. Anyway, I love your products. Get back to me.” And I say, “Thanks.”

Andrew: Would you do a special zebra edition for them?

Ryan: Yeah. She didn’t give any suggestions about, you know, what she would like. Just yuck.

Andrew: And finally we’re done here, kind of in your overflow. I was telling you, your warehouse is really well put together and organized. What’s the story behind this building? And, like, down here, you know, we’re in the kind of the basement specifically. It’s got a cool backstory.

Ryan: So there’s a reality TV show called “American Guns.” And it was on the Discovery Channel. And that was in this building. And they made the guns in the basement here where we’re standing. And it’s pretty cool show.

Andrew: And then what happened on the back side to you guys have it?

Ryan: And then he got indicted on 13 felonies. And he was going to jail so he needed to sell a building quick. And I think we got a really good deal on the building.

Andrew: So looking for real estate, find someone with 13 felonies.

Man: Going to jail, yeah.

Ryan: Right. It’s all over the local news at the time.

Andrew: Ryan, thanks for letting me stop by, man.

Ryan: Yeah, thank you.

Andrew: After meeting with Ryan, headed down to the Airbnb, got checked in, and met up with Scott and Patti Scharf from catchingclouds.com. They’re the accounting experts in the community for ECF. And had a great dinner with them, just talking about things, especially talking a lot about sales tax and the amnesty program that has, you know, been floating around. So they also were the sponsors for the meetup. So, Scott and Patti, thank you for hosting the Denver meetup. Had the meetup a couple blocks away. Great, you know, had a good turnout of 10 to 12 people. And it was fun. Just chat with people, getting to know ’em, talking, and had a great time having some beers and hanging out. So I headed back to the Airbnb after that and recorded kind of a late-night reminiscence of the day.

It’s about 10:50 p.m. on the second day here of ECF week in Denver, Colorado. Two quick thoughts before I wrap up the day. One is Denver just seems to be just exploding. I’ve had five or six conversations just today with people about how quickly this place is growing, how fast homes are appreciating, and how traffic is noticeably different in just one or two years, which is kinda wild. The other thing is I’m starting to hear a meaningful number of people talking about how Amazon is getting really difficult, really kind of frustrations about Amazon in terms of the competition, headaches, the profitability that I haven’t obviously…it’s always been there, but hearing it at a much higher rate, just chatting, which is interesting. So it’s interesting to see if that that holds up throughout the rest of the trip. So I’m going to sleep on a good day. Good night.

Eating Alone Isn’t Half Bad

Next morning, got up and had a quick little breakfast for myself before I headed the airport. So one thing I’d say, a lot of people don’t like eating meals in a restaurant solo. I have never had that. Maybe I just have no shame. That probably is most likely what the problem is. But it’s great. You sit there, you can drink your coffee, and read, listen to a podcast in peace. And I don’t know, I mean, granted if I had to choose between having a good friend or Annie sitting across from me, of course, I’m gonna pick that. But I don’t know. Eating by yourself, give it a chance next time. You might like it.

Off to Austin, Texas

Anyway, had a little breakfast or romantic breakfast with myself. It sounds weird. And hopped on an airplane, quick hop over in Dallas. Barely made my connection. I thought I was gonna miss it actually. Our event coronary was helping me plan logistics. Called one of our…Alan Walton from the community who was driving from Dallas to Austin for the meetup. And he almost turned around to come get me because I didn’t think I was gonna make the connection. But had a very classic, you know, sprint through the airport. Really, you know, it only goes to feel classy when you’re doing that sprint through the airport. Made the connection, got over to Austin, and met up at the Beardbrand offices for the meetup. A bunch of square.

My Guest of Honor: Cardboard Jeff Bezos

One thing I have not mentioned yet is life-sized Jeff Bezos. So I’m sure a lot of you guys have seen the kind of the internet meme about Jeff Bezos in 1997 looking very geeky. And then again in 2014 or ’15 looking like Vince Diesel. And so we had, we made a full life-sized cutout of buff Jeff Bezos. And I’ll include a bunch of pictures in the show notes. But it was interesting to travel with. Not as many people as I expected knew who he was. Because I set him up to greet everybody when people walked into these meetups. So that was a little awkward. People just, you know, wondered why I had this creepy guy life-size cutout in front of the entryway.

But the other thing is traveling with this guy was brutal. You know, TSA gave him the full shakedown every time we went through on the airplanes, especially the small commuter ones. I had to resort to usually getting permission from people in front of me and behind me and then slamming him between the seats and the wall, the windows, because he took up like two or three spaces. As you will see, Jeff did not make it all the way through the trip, partially because he started disintegrating as he was made of cardboard, about half way through. But he was a lot of fun for the first three or four legs of the journey. If you wanna see some of the pictures, you can head on over to the eCommerceFuel.com and check out the blog post.

So anyway, back to the road trip in Austin. Head over to Beardbrand headquarters where Eric Bandholz had graciously allowed us to take over his very cool offices right on 6th Street. Great venue for the meetup. And great turnout. Probably 20-ish plus people there, plus or minus. Really fun. Austin crew, thank you for coming out. And had a chance to chat with one.

I’m here in the Beardbrand headquarters in Austin with Mr. Aaron. Aaron, how are you doing, sir?

Andrew: And thebeerbelly.com, that sounds intriguing. What’s that? And I know what it is, but tell people what it is.

Aaron: So thebeerbelly.com is a product-based business where we manufacture a product that allows you to smuggle beverages into certain events. We have a Beerbelly product, and one called the wine rack. The wine rack is a sports bra that allows you to wear your wine, so…

Andrew: And how many ounces of delicious brew could I fit into one of these belly things to smuggle in?

Aaron: So you can get 80 ounces of your favorite beverage in there. This product has been around for quite a while. We actually acquired the business back in somewhere around ’08 or so, ’09.

Andrew: And if you had to say the one thing you’re most excited about right now, what would that be?

Aaron: You know, what’s excited, I’d say probably just the ability to build out big beautiful websites and new brands, and how easy it is right now. I’m currently working on a couple other projects unrelated to my current businesses. And it’s just incredibly, I would say easy in comparison to a decade ago to build out a beautiful platform and then push your products to market.

Andrew: Easier to build out a platform. Do you feel like it’s harder, though, to actually get traction, and given more competition, and the fact that e-commerce is more mature?

Aaron: Yeah, for sure. So then you, you know, you obviously have to have a niche product or a method of driving traffic that is proven to you. And, yeah, that’s definitely a challenge.

Andrew: And what are you drinking right now?

Aaron: We’ve got a nice little Merlot.

Andrew: Awesome, dude. Good seeing you again.

Aaron: Yeah, thanks man. Good to see you.

Booking it to Charlotte

Andrew: So after we wrapped things up, Jeff and I headed back to my Airbnb. That also sounds weird and creepy. But we headed back to Airbnb, and got up really early the next morning to head on over to Charlotte, North Carolina. So quick stop in Atlanta. Fortunately, no run of shame through the airport to make a connection. Landed in Charlotte. And Charlotte is where, of course, Bill DAlessandro is headquartered in Elements Brands. Very important to pronounce the s’es on both of those. If you wanna really drive Bill crazy, call it Element Brand. It’s a lot of fun actually, so I recommend it.

But he was kind enough to have us at his newly renovated offices. They’re beautiful. They took a warehouse, expanded the back of it, done a bunch of work in it. It’s a really cool space. Have a front office that’s nicely done and the huge warehouse in the back. And great crew. Everyone who came out to the Charlotte meetup, thank you for coming. I got to meet some people that I haven’t, you know, long time forum members that I have never met before. Like Joe Cochran, and Brian Goodwin, a bunch of others, too, that it’s so cool to meet in person after you, you know, you’ve seen someone and read their stuff and interacted with them online so long, meeting in person was really cool.

So we all grab some sushi. And after we stuffed ourselves there, we just walked right across the street to Bill’s, those offices, and had a meetup. And we, man, we rallied. We were there from probably 7:00 till midnight or later. Right around midnight I think is when we finally closed things up. So especially thanks to Johnny. And Johnny, thank you for helping out and volunteering with that. And had a chance to pull Alex Thrasher. One of the members aside and chat with him.

So I’m here in Bill DAlessando’s warehouse, where we just got the tour about two hours ago with Alex Thrasher, also known as Malko. So, Malko, what’s the story behind this? This is a cool story. Why the pseudonym?

Malko: Andrew and I were just talking about how when I started my business, I was working full-time at a bank. And as anybody who knows who’s been in the financial industry, it’s a frowned upon thing to have a side business on the side. It’s very much a no-go. So when I first got started in e-commerce, it was with a group of guys. We were working out, doing boot camp workouts, and I was ordering t-shirts for those guys. And that t-shirt business actually turned into a manufacturing business, making my own stuff. Long story short, I spent about three and a half years building up a side hustle to be a real business. And throughout that time, the entire business was built under my side name, my nickname, Malko. And that’s how I joined the e-commerce forum. I was Malko. And I was doing all my emails from my banding cart sequence. Everything that came out from the company was under the name Malko. So I answer to that now just as much as anything else.

Andrew: It’s cool. Like I, even now, feel like I know you as Malko and not Alex. Remember the first time, it was like, “Oh, Alex did this.” And pointing to you, I’m like, “No, no, no. His name’s Malko.” Anyway, I used to sell at mudgear.com and adventure racing and kind of endurance racing apparel. And you’re coming up on your one-year anniversary of quitting your job, right?

Malko: Exactly, yeah. So it was July 2017 that I gave my notice at the bank. It was a two-week notice. And at that point, I had, the day before I gave my notice, I had my last performance review. And it’s something I’m really proud of. I had a “Exceeds expectations” at the bank while running my side hustle that had become big enough for me to quit and do it full-time. So that was something that I, you know, wanted to be sure I was still, you know, giving my full effort there. But I had built it to the point where was something I knew I wanted to tackle and take advantage of the opportunity. So the day I gave my notice was the day after that last good performance review. And found out the next day that I’ve actually signed something a year ago that gave me, you know, an extra period of time, a small period of paid leave before I had to fully get off the payroll. So that gave me even a bit more buffer after I had left to be able to plow into the business and continue to build it to be something that, you know, maintained the lifestyle for me and my family before we were totally, you know, dependent on the company for that.

Andrew: That’s awesome. Congrats on your year anniversary. And here’s to many more.

Malko: Yeah, thank you very much.

Andrew: So I had a great time at the meetup and chatting with everybody. Thank you, everyone, who came out, again, to the Charlotte meetup. Crashed that evening, got up the next morning, and had the chance to have breakfast. Not Solo myself, but with other people. Bill and a handful of other people had breakfast and then headed off to the airport to head to Philadelphia. And to be honest, I was a little lonely.

Jeff Makes an Early Departure

It was a little bittersweet because I left Jeff at the Element Brand, the thing is Element Brand, not Elements Brands. Pretty sure it’s the first one. We left Jeff at Bill’s, at Bill’s place. And no disrespect intended at all, Jeff, but we ended up doing, because I knew he’s gonna leave him there because I was tired of traveling with a huge full life-sized cutout of a person, we removed the cardboard head from Jeff Bezos so that we could do, we could take pictures of ourselves impersonating Jeff ripped Bezos. So if you wanna head over to the blog and the show notes for this, you can see pictures of myself, Bill, and Mike Jackness, all doing our best ripped Jeff Bezos impression donning sunglasses with the cardboard body in front of us. That might be too much information but I’ll throw it out there. Apologies if it is.

Anyway, headed to the airport. I hopped on the plane, landed in Philadelphia. And had a really good meetup at a brewery that evening with the Philly crew. So thank you for coming out, everyone. Nate, thank you for coming down from D.C., driving all the way down for the meetup. And also for organizing the D.C. Baltimore meetup. That was awesome. Thank you, sir Nathan. Yeah, thank you, man. And Lindsey, thank you for being the volunteer to help out with a lot of bringing the stuff in and some of the logistics. But, yeah, had a great night. Although the only problem was a little noisy in there. My voice was, you know, been talking nonstop for a lot of the last three, four days in the evenings. And as you will see, as I got back to my Airbnb ending with a quick recording, it is starting to take its toll.

Philly Next!

It’s late on Friday night. I guess technically Saturday morning. And just got back from the meetup with the Philadelphia crew, which is…which is a ton of fun. Great members here. I really enjoyed chat with them over a few beers tonight. And if you can tell, that the voice is quickly…it took a drastic change today. I feel like it’s going out. And really hoping it last me another three meetups there. Hopefully I’m not completely mute by the time I wrap this thing up. Good thing I landed at this Airbnb tonight. I think it’s the only one so far that’s had washer and dryer. And it was very good timing because I was just wrapping up on anything clean in the sock, underwear, or shirt department. Given that I’m going so light, traveling with a tiny little backpack. So, yeah, so very good. That probably prevent me from parting the waters, so to speak, at future meetups. Anyway, that’s it for tonight. I shouldn’t be talking. My voice is just a bad shot. So I’m gonna hit the sack and go up on a train I guess in the morning to New York. Looking forward to hanging out with Jason and the crew there. All right. Good night.

So after trying to get some sleep and rest the voice, got up the next morning and had…I never really spend much time in Philly. So headed downtown, saw the Liberty Bell. I don’t even remember the name of wherever they drafted the Declaration of Independence and the Constitution. Probably I’m getting that wrong, and will probably get emails from people in Philadelphia who will correct me about one of the two of those. Anyway, all the historical stuff in Philly were very cool. Lasting impressions, you can tell. Yeah, check that out. Took an Amtrak from Philly up to New York, which is…which is really cool. I don’t get to travel by train much so that’s always a fun thing to do.

The Big Apple

It was always fun coming into New York. New York is just…it’s just a cool city, especially seeing that skyline as you’re coming in. It’s impressive. So, came in, took the subway over to Brooklyn, and got landed in my Airbnb there, and headed out to meetup with Jason Feinberg who’s the owner of FCTRY. Had the chance to sit down with him over coffee beforehand, which was a lot of fun. And then we headed over to his loft where he promptly destroyed me in ping-pong. And we got the meetup underway. So I had a great meetup, chance to meet a lot of people. Thank you, everyone, who came in for that meetup. And had a chance to sit down and shout at a few people there on the mic before I took off.

Mr. Jason Feinberg. Thanks for having us, dude.

Jason: No problem. Thanks for being here, Andrew.

Andrew: This is a gorgeous space you have. You moved in here, what, like, six weeks ago?

Jason: Yeah, about six weeks.

Andrew: It’s awesome, beautiful. There were like, 15-foot ceilings, all white. It looks like something out of a magazine. It’s really cool. Plus, the best part, of course, is the ping-pong table where you just summarily destroyed me about 20 minutes ago.

Jason: It’s been a couple years in the common, Andrew.

Andrew: Anyway, dude, thanks for having us. What do you, just quickly, for people listening that may not be familiar to you, what’s your company?

Jason: My company is called FCTRY. We’re a mostly product design company. We make fun stuff. So anything that’s in the consumer product space that we think we can make more fun, we’ll make that, and then we’ll just trying to build a brand around it.

Andrew: So what’s one or two examples of stuff that you guys make?

Jason: Right now, our most popular product is called the Unicorn Snot. It’s a glitter gel. It’s a cosmetic glitter gel. It’s now expanded out into sunscreen and lip gloss and a couple other cosmetic glittery goos. Another one is our hipster kid line, which is sort of fashion-forward accessories for very young children.

Andrew: And very fitting that you’re based out of Brooklyn, of course. Why Brooklyn? Why are you guys here?

Jason: I mean, I grew up here. Where else am I gonna go? I’ve been in Brooklyn now since 2001. The reason I’m in Brooklyn is because I couldn’t afford to live in Manhattan in 2001.

Andrew: And for people that maybe aren’t familiar with the scene, what’s happened in Brooklyn over the last, let’s say, five, six years?

Jason: Over a slightly longer period, over the last, really, 15 years, I’ve been here to get to see it to serve an artistic and creative renaissance that has now turned into more of a, sort of morphed into…I don’t wanna say a commercial renaissance. It’s come together, this is the creative boom with a commercial boom. And there’s just a lot of creative activity going on here right now. It’s a hotbed of innovation and just interesting ideas.

Andrew: And final question, I can’t believe I’m the spy here, who’s on the e-commerce fuel forum member that you have never met but would love to sit down with and get to know better?

Jason: I have never talked to Eric Bandholz, and I would love to sit down with him.

Andrew: Awesome. I had a great meetup. Thanks for destroying me in ping-pong. I’m gonna go home and practice. It’s always good hanging out, buddy.

Andrew: And what would you say is the most interesting thing that you sell, like the most interesting type of lock or safe.

Jim: Well, you’re gonna think I’m a little bit of a lock geek by saying this but I think all locks are interesting. They come in so many configurations, so many finishes and functions that…I guess I’m just a lock geek. So I like them all.

Andrew: Like, we were just looking at a biometric lock that Jason has installed here. You’re telling me that there’s some types of locks that you get outfitted at school, for example, with a bunch of wireless enabled locks that can be configured to lock down and like an act to your situation or just remotely. And I was asking you earlier, it’s kind of an interesting question, though, how difficult would it be if you were…you seemed like a very nice guy, but given your knowledge, how difficult would it be to get into most of the locks and safe, you know, just on an average street in America?

Jim: Well, I guess I try to be a pretty nice guy. So I try to be the guy that would operate with honesty and integrity. And I do do that. But I suppose if I did go on the wrong side, I could be kind of a dangerous person.

Andrew: We’ll leave it at that. And then maybe quickly before we wrap it up, how’d you get into this business? You have a background being locksmith, right?

Jim: Yes, that’s right. I’ve been a locksmith for 30 years now. And I thought, well, what a great way to reach so many more people. This would be utilizing the digital medium of the internet. And you know, through that experience and really just kind of teaching myself as I went on, I was fortunate enough to meet you, Andrew, and get on the eCommerceFuel forum. You know, it’s been such a great experience for me to connect with so many other people that have such a diverse base of experience with e-commerce. Of course, everybody sells something different. So it’s not really a problem or worried about competition between one another. And it’s just been really a great experience. Because I never really thought too much about, you know, email marketing or that kind of thing. I know locks inside and out. But it’s been a great experience for me to learn more about e-commerce. So, you know, I’m really grateful for that to you.

Andrew: Oh, it’s great having you in the community. Thank you. And thanks for making the drive down here. It was a little bit of a haul for you and your wife, so thanks for coming.

Jim: Oh, it’s been a pleasure, Andrew. Thank you so much for having us.

Detroit Here We Come!

Andrew: So after a great meetup in New York City/Brooklyn, got up the next morning up on the airplane, land in Detroit. And Detroit was one of the cities I was probably most curious to see. I have never been to Detroit apart from flying through, which means I’ve never been to Detroit. And there’s so much has happened there at the last, you know, 10 plus years in terms of the auto industry, and some of the economic issues, and potentially, you know, Detroit coming back a little bit. I’m hearing rumors about that. And so I was really curious to see what the city was like. And so getting out, I asked pretty much everybody there from, you know, the four or five Uber drivers I had when I was in the city, to asking the people I met up with there, what it was like. And overwhelmingly, people were excited and optimistic and bullish about the city. Jobs were coming back. A fairly strong revitalization it sounds like has taken hold.

Personally, I did not see…you think of Detroit and what immediately comes to mind this is, you know, abandoned buildings and just kind of urban decay. And I didn’t see any of that. I didn’t do a… Detroit is an enormous city. And for the most part, I saw between the airport and downtown and walking around a lot downtown. But it was cool. It was cool to see that city coming back. It sounds like a lot of businesses are coming back. And they’ve done a really good job trying to revitalize the downtown and among other areas. So kind of a cool backdrop for the meetup that we had. So we had the chance to do a meetup. And of all of meetups we had, this one was definitely the most sparsely attended, partially because Detroit, we just didn’t have a lot of members in that area.

We kind of picked it because we wanted to go somewhere out of the way a little bit and meet people I hadn’t met in that part of the country before. But we just didn’t have a ton of members. And a lot of people couldn’t come last minute, I think. And so we had three of us. And then for most of it, it was Andy Humphrey and myself hanging out having a beer, which probably was good. One, it was great to get to know Andy personally really well. So, Andy, thanks for coming out, buddy. And the second thing was I, at that point, could not, could barely talk, you know, in a whisper. And so it was probably good that I wasn’t trying to talk with, you know, a ton of people. Andy, I feel sorry for you that you had to, you know, deal with that and having me whisper in your ear more or less all evening to communicate. So anyway, great night chatting with Andy, and retired early, and headed back.

Andrew Goes Without Talking

And so the next morning, actually, in route to Toronto, I made the commitment for a day-and-a-half to do zero talking, to try to let my voice recover. And to the point where when I got into my Uber the next day, I handed my Uber driver a note that said, “I’m sorry. I can’t speak.” You know, “If you need me to write anything down, I’m happy to.” And, you know, he gave me kind of a, you know, he was cool about it. But anyway, the next 36 hours, from ordering food, to the airplane, I went through Canadian customs without saying anything to them. I just handed them a piece of paper and made yes/no motions and they let me through, which was shocking, but it worked. Anyway, it worked out great, landed in Toronto, got set up. And up until the next day at lunchtime, had a chance to, again, it was just, had a chance to recover. My voice came back at least a little bit stronger if not in full.

Toronto! Final Stop at Shopify HQ

But Toronto is a cool city. It’s another place I have only…I had never been apart from flying through. And it’s just, granted I landed there probably about the most perfect time you could have with the weather. It was 70 degrees. It was sunny. It was beautiful. It was fall. But a really cool city. I was also in like King Street, which is a pretty kind of chic place I think. But I was impressed with the city, impressed with the friendliness of the people, just the city itself. And if I was gonna live in any major big city, I would strongly consider Toronto. It was a cool place.

So, had a chance, fortunately, the first night I was there, we had nothing planned. This was the first night I didn’t have anything planned on the trip. And the next night we had a meetup at Shopify. Shopify was kind enough to host us at their headquarters there. And it was great. We had a room all to ourselves. Probably had 25-ish plus or minus, maybe close to 30 people at the event. A lot of team members from Shopify were there, which was really cool. So a chance for the Shopify team and the ECF members to get together, which was great. So for everyone in Toronto, thank you for coming out to the meetup. Thank you, Shopify, for having us and actually had a chance to sit down with a couple of the guys from Shopify and chat.

I’m at the Shopify offices in Toronto in the Hogwarts conference room with a couple great guys. Guys, can you introduce yourself, and just let people know what you do at Shopify?

Abdul: Hey, guys. I’m Abdul Mateen Kenduala, and I’m on the community development team at Shopify, building community around areas that Shopify believes in, Shopify is involved in, in Toronto specifically.

Andrew: And you were the main man helping us during the meetup last night. Thanks so much, dude. It was fun having everyone there. Appreciate your work.

Abdul: Man, it was a blast. It was a blast, honestly. Great company, learned a lot, and it was just a good time in general.

Andrew: Awesome. And you, sir?

Mark: Mark McDonald. I’m the content marketing lead here at Shopify. So my team and I, we create all of our educational resources, blog post, podcast, video tutorials that help our merchants figure out how to sell online successfully and build businesses.

Andrew: And this is the second time I’ve roped you into one of my impromptu podcast interview. So thanks for being a good sport, man.

Mark: Yeah, you bet. Always great talking to you, Andrew, and the eComFuel community, which is a great group of folks to be with last night.

Andrew: So a couple quick questions. What’s your favorite Shopify store that you don’t own or run that you’ve seen? And it could be…this have to be the one, but maybe, you know, one that you’ve seen that you are really impressed by.

Abdul: I’d go with The Legends League store. He’s played around with the names a lot. But he’s from Toronto. A great artist, the stuff that he believes in, the things that he creates, and how he loves his fans. And I think part of it is not just the store itself. Like, the store is a beauty, but part of it is how he promotes the product on social media, and what he stands for, and how he engages with his audience members, that sort of stuff. And, like, I mean, I vibe with the apparel that he sells, too. So that works, you know.

Mark: I love what Jeff Sheldon has built with his store Ugmonk. You can tell it’s really a passion-based business that somebody who’s building products, who cares about design. I got a great wallet from his store that I love. And it was cool to see…he recently did a IndieGoGo campaign, I believe. It might’ve been a Kickstarter for a new minimalist, like, desk organization kind of accessory, which was really cool. He killed it. I think he did like over $400,000 in funding. So just an impressive kind of entrepreneur who’s building a creative business, and he seems like he’s really making a living on his own terms.

Andrew: Cool. And I actually didn’t have some of Jeff. We’ll link up to that in the show notes if you’re curious about learning more. And final question, I wanna ask you guys to give me some predictions on the Shopify stock price. I’m guessing next I’m getting some kind of SEC rule, or can, you know, so avoid, for you guys, some awkward/illegal situation, and instead ask you last question. Is there a meal at Shopify you guys had…thank you for the lunch invite. That was awesome. Obviously, you know, fantastic meals. Is there a meal where a day of the week or you guys gorge on something like it’s…if it’s Thursday, it’s like Indian food then you just go bananas? Is there a meal where you just like get in trouble because it’s so good?

Abdul: I go crazy over the snacks every day. Like I don’t think it’s the meals, per se, but it’s the snack well, man. Always munching on something.

Mark: Yeah, we’re a little bit sprawled on the meal front. I love jerk chicken day. We do get Indian time to time, and it drives my wife crazy because I never feel like Indian food when she wants to get takeout. Because we had it like the day before kind of thing. But I’d say jerk chicken is my favorite day.

Andrew: Awesome. Guys, appreciate you having me here. Thanks for the chain smoker sounding gag coming in, infiltrate the office for a few days. It’s been fun. Appreciate you guys, and the hospitality.

Abdul: Awesome.

Mark: Thanks, man.

Andrew: So after the meetup, a bunch of us headed out and had drinks at a local bar for a couple hours and close things down around midnight. And just a lot of fun, again, meeting. I feel like I maybe repeating myself here, but it’s so cool to meet people in person that you’ve known online for so long. So, everyone who made it out to the Toronto meetup, thank you. Thank you for coming. It was a great way to cap off the trip. I felt like we close things out well and appreciate you guys all making the trip down to join us and get together.

So after the meetup, the morning after I had a kind of afternoon flight. So I had a little bit of time in the city, had a couple of appointments and people to meet up with. And one of them that that kind of transpired just kind of serendipitously was with a company called Shoelace. They knew I was in Toronto, or one of their team members reached out to me on Twitter. And I had the chance to just drop in really quickly, which was great, because they’re a great company. Really cool to learn about what they did. And they’re actually gonna be sponsoring ECF Live in Laguna Beach this January. So I had a chance to sit down and talk to them for a minute or two.

So what’s your name?

Meeting with Shoelace

Fiona: It’s Fiona.

Andrew: And what company are you with, Fiona?

Fiona: I am with Shoelace. We do retargeting on autopilot.

Andrew: And what does that mean in a nutshell?

Fiona: So in a nutshell, our app is being built to automate retargeting expertise. And what that means is we automate all the daily tasks associated with retargeting. Retargeting on Facebook and Instagram, and creating the campaigns for you, managing them for you, optimizing them for you. And we do this based on all of the data that we get from campaigns that we already run for customers. So all those learnings are incorporated into the product. And then we can…you have access to that expertise through us.

Andrew: Now we’re talking just really quickly earlier. You love Toronto. Why do you love Toronto?

Fiona: I love Toronto for so many reasons. So I’ve lived here about 15 years. And I’ve seen it develop into the awesome, awesome city that it is today. It’s like super diverse. Anywhere from, like, you look at the architecture around, you look at the art scene around, you look at the diversity of just the people, like you’ll walk down the street and hear 10 different languages and it’s awesome. And, of course, the tech scene is awesome, too. Like, there’s startups all over the place and meetups for startups all over the place. You could see that some is truly awesome. And Shopify is just down the street.

Andrew: And finally, who is the craziest person in your office and why?

Fiona: The craziest. There are a lot of characters in this office. That’s a tough one.

Andrew: Do you get to choose from right here?

Fiona: I’d say Alex. No, really, everybody has like their own craziness that they bring to Shoelace. So I can’t actually narrow down.

Andrew: Where would the guy who has like a hundred different nerf ammunition things surrounding his chair following that net?

Fiona: Yeah, Ollie is our front-end developer and he was high up on the list. But there’s all these like flashbacks I’m having from my time at Shoelace, and everybody has a crazy side. So, yeah, but that was Ollie.

Andrew: Awesome. Thanks for having me.

Fiona: Thank you.

Andrew: So after wrapping up that in my downtown Toronto meetings, hopped in an Uber, headed up to the airport for that final leg home. And sat down and recorded in the moment just a few of the closing thoughts before I officially wrapped up the whole trip.

It’s about 4:00 on October 4th, and I’m at Toronto Airport, just about ready to hop on a plane back to the states and wrap up the entire ECF week. Quick last dispatch from the field before wrapping this whole thing up, I feel surprisingly good apart from sounding like chain smoker here. There’s a rough patch between Philadelphia and Detroit where I was feeling pretty wiped out. But I feel a lot better. I could do this for another week. Plus, if I, you know, needed to, which is shocking, I thought I was gonna be a train wreck. You know, thinking back on this trip, this whole tour, if it was worth doing. And I mean, it was ambitious itinerary, and a lot to put together, but totally worth doing. And to see so many members come together over the past week, both on the tour and just globally, was awesome. I got to meet a ton of members for the first time that I’ve never met in person, which is always great. I got a lot of great feedback on how to improve the community and the future meetups.

And plus, man, just being able to be on the road this much and see this much ground in eight days is pretty cool. Yeah, really glad we did this, and looking forward to making ECF week. Maybe not doing this on a, you know, multiple times a year. I don’t know if I’d be able to pull that off. But being able to do local meetups for our community, for our community members, you know, three times a year in a collaborated fashion like this is something I’m really looking forward to doing.

Departing Thoughts

So, sad to hop on a plane, get home, see my girls and Annie. I have a hunch that Bozeman is gonna feel a little sleepy after being in only major metro areas for the last week. Plus, I’ve become acclimated to that level of activity and population bustle. And, yeah, probably if you like pulling into a cow town when I get back, but excited to get home. And thanks to everyone who was a part of this, especially when you came out to the meetups. People who, locally, of course, but especially if you drove. A lot of people drove in from hours away to attend some of these meetups. If you hosted a meetup, thank you. And especially to Lauren Caselli who was our person who put a lot of the logistics together. She was tremendously helpful in making this possible. Couldn’t done it without her. If you’re looking for a great event planner, Lauren Caselli is someone absolutely to check out, and I’ll link up her website in the show notes. Thank You, Lauren. And Laura Serena, or community manager as well, for all you guys’ help to making this possible. So, all right. I’m gonna go hop on a plane and head home. It’s been a lot of fun. Thanks, guys.

I’ll leave you with some final numbers here. Total number of flights for the trip, 10. Number of Uber rides, 26. Number of handwritten notes telling people I couldn’t talk, 7. Number of beers, 10. Number of tonic waters in lime plus Lacroix, 16. I got a piece myself, man, otherwise I would have been a total train wreck. Number of cities, 8. Total number of days, 9. And the total number of ECF members I got to meet up with in person, about 105-ish. I’ll be honest. I didn’t count every single one but rough tallies of the meetups there. And total number of ECF week meetups worldwide, 23. It was a lot of fun. Thank you, everyone who came out and joined, hosted a meetup somewhere in the world or helped in any way. Really appreciate you, guys. It was a blast getting to do it.

And if this sounds like fun to you, come join us inside eCommerceFuel. It’s our private community for e-commerce entrepreneurs and store owners doing at least a quarter million dollars in annual sales. And apart from getting to come to things like this like, these exclusive meetups that we have, we’ve got a vibrant online forum with vibrant discussion board, proprietary software to help you pick the best tools for your business, and live events in addition to ECF week. So if that sounds interesting to you, please apply to join us. I’d love to hear from you. ecommercefuel.com is where you can learn more and apply for membership.

ECF Week Will Return

And on the back side, looking forward to do an ECF week again, like I mentioned in the airport in Toronto. So stay tuned. We’re hoping to do this shortly after the live event at Laguna that we’re having in January. And hoping to make it a regular occurrence. So thanks so much for listening. Thanks for coming on the journey with me. And thank you, everyone, who’s a part of the trip in ECF week. I’ll chat next Friday.

Want to connect with and learn from other proven e-commerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight-knit, vetted group for store owners with at least a quarter million dollars in annual sales. You can learn more and apply for membership at ecommercefuel.com. Thanks so much for listening, and I’m looking forward to seeing you again next time.

Customer lifetime value (LTV) is a term you can toss out at cocktail parties to sound smart. Want to look like Matt Damon in Good Will Hunting? Just say something like this at your next highfalutin business get together: “Oh yeah? Well this year I focused on getting my CPA below my LTV, I’m highly [...]

Andrew: Welcome to the eCommerceFuel podcast. The show dedicated to helping high six and seven figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow e-commerce entrepreneur, Andrew Youderian.

Hey, guys Andrew here and welcome to the “eCommerceFuel” podcast. Thank you so much for joining me on the episode today. And on the show, I was joined in person who sat down at the ECF headquarter here Bozeman, Montana with Dave Bayless, another local Montanan here from Human Scale Business to talk about a couple different things. We talked about lifetime value. This is somewhat academic term that gets thrown around a lot. I think people know about at a conceptual high level K after a value. It’s, what, you know, the total value of a customer over the life of their interactions with my business.

But we dive into is something that how hard is it to calculate, is it something you’d take a stab at? You know, if you do spend the time to actually do that, what kind of questions should you start asking? And can you, you know, start using to help make changes in your business using that lifetime value data to improve your business? Should you finance growth if you think you have a lifetime value that’s really high in the long-term but you don’t have cash short-term?

We will talk a bunch of these kind of stuff. So that’s something that’s interesting to you and you like most people, you know, myself included, where most of my business career where I had no idea what your lifetime value was, hopefully that’ll be interesting enough.

And then the second part of our discussion, we dive into we talk about investing and not investing in the traditional stock market, S&P 500 sense, but we talk about investing in e-commerce companies. Obviously, if you own your own company you’re heavily invested in e-commerce but we take that approach of is there an opportunity and if so how would that look to invest in e-commerce companies on a broader sense, put together an investment of, you know, put money into multiple e-commerce companies not necessarily as the owner operated but as a strategic partner and investor.

You look at multiples on a lot of these companies that, you know, where they traded, you know, in that seven figure range even go up to $10 million, you know, or someone who’s generating around a million dollars in profit or even up a year, the multiples are still fairly low.

And so, you know, a lot of people, myself included, have looked at that and said “Man, looks like there’s an opportunity there but how do you tap into that? How does that work?” It’s a very unique and there are challenges to being able to do that. So, Dave has got a background of private equity, he’s got a background of investing and also working with, you know, these kinds of companies, you know, really in the trenches so we talk a lot about that.

So, a couple different topics both may or may not appeal to you but hopefully one of them does and you’ll get a lot of value out of this. So, with that I’m gonna play that funky transition music and we’re gonna get into my discussion with Dave.

Dave, welcome back to the show.

Dave: Glad to be back. Thanks for having me.

LTV Meaningful for Small Businesses

Andrew: We’ll get couple of cold beers another one here soon, and glad you’re willing to come talk about lifetime value. I think the lifetime value is one of those things that, academically, gets talked about a lot. I’m guessing almost everyone listening knows what it is. I’m guessing almost everyone listening probably doesn’t know what the actual lifetime value is. So, it sounds great theoretically but is that all it is like I love to get your take because it’s something you’ve had a lot about, worked a lot of companies on.

And then we can start with is lifetime value is something that’s great for big companies like Starbucks and Walmart to make decisions but it actually isn’t very practical for most smaller, you know, say, like six seven figure merchant stores, so is it something that you even a small, you know, medium sized seven figure merchant can actually use that and calculate to inform meaningful decisions in their business?

Dave: It’s a great question and it sounds like your experience has not been too different than mine, in some sense. You know, I learned about customer lifetime value probably back in, you know, eons ago when I went to business school and I came to recognize it always as just a special case of net present value analysis. And, yeah, that’s useful and interesting and then I kind of packed it away and didn’t even think about it for 20 years.

It wasn’t something that really was applicable to my daily existence. What’s been interesting for me is, over last few years, as I’ve come to work with a lot more six and seven figure e-commerce sellers, it’s come back to the floor. So, I think, like any tool it depends on the job at hand, and, I think, for very small companies it’s not a terribly useful or interesting tool because the company is small enough and simple enough that managing by intuition is sufficient.

You, kind of, know what’s going on. There’s not very much additional information customer lifetime value calculation can provide. When you’re a really, really big company, I think, people talk about it a lot but it ultimately sort of boils down, I think, to an academic kind of idea because big companies are so siloed that the core strength of customer lifetime value and that’s it’s, sort of, integrated perspective on value really isn’t something that you can act upon.

You know, if you’re head of customer support, you can’t pull the levers in sales or product design. So you can calculate it all day long, you just can’t do much about it. People with a seven figure store are facing enough complexity that intuition is insufficient, but they’re also in the driver seat. They can make policy decisions, they need to have an integrated view of their business and customer lifetime value becomes a really useful tool in that situation.

How LTV Can Affect Change

Andrew: So before we dive super deep, can you give us maybe a couple of anecdotes or some examples of how you’ve worked with businesses and retailers to calculate or look at their LTV and use that data to be able to make decisions that ideally or hopefully helping long-term trajectory of the business.

Dave: Sure. So one company a maker of their own product which is sold primarily through online but also through a network of wholesale customers and that had grown let’s call it organically, you know, in a very ad hoc manner. And it was a collection of large wholesale buyers. And, over time, lots of very small retailers who bought whole sale from them. And they didn’t have a process around selling to wholesale. So the little guys, the little customers had the same sort of bespoke ordering and pricing and customer service and shipping fulfillment processes that a big customer might impose upon you.

So, in this case, we use the customer lifetime value framework to recognize it, “Hey, there’s a cost associated with this category of customer,” the sort of small ad hoc wholesale, you know, buyers. And it’s really quite expensive to service them. So, we went through the, you know, a reasonable process of estimating valuation, and what became apparent was that the customer lifetime value for that category of customer was zero or negative. And what that spawn was a conversation about what to do about it.

There were lots of things that could be done. You could walk away from that customer base and focus your time and energy in limited financial resources on higher value customer channels. You could rethink pricing for example to make it a function of the volume people bought or the frequency of what they repurchased. I think one of the really important outcomes was rethinking the whole process.

So one of the things I’ve been excited about recently is the emergence of Shopify’s wholesale channel, for instance, to apply those familiar online processes to specialty retail customers. So, they don’t have to be as expensive to serve and all those things change the equation.

The Best Way(s) To Use It

Andrew: So when you think that LTV, does it ever make sense to do just one overarching lifetime value or to really use it effectively? Do you need to split it up to get LTV for all of your different popular types of customer segments? Sounds like I’m guessing the latter.

Dave: You know, my experience isn’t broad enough to have some, sort of, definitive, you know, perspective. Where I found myself applying it is usually about a customer category. And oftentimes, it’s related to a channel or a geography. Sometimes if there’s a distinct enough product category. And remember that most of the people that we work with are making their own product rather than buying lots, you know. So they’re not dealing with a thousand skews, they are dealing with a couple dozen maybe 100 skews overall.

So, in my experience, it hasn’t been so much about product categories, it’s really been about marketing and distribution channels.

Andrew: Can you kinda talk a little bit about thinking through the importance of getting an exact number and using…There are some bunch of different formulas and methods multiple ones for calculate lifetime value, maybe explain your thought process behind if you should. And if it’s really important to use one of those exactly and to get a very concrete exact academic number, or if you can, kind of, do a little bit more of a quick and dirty calculation to get something that’s in the ballpark. Like, how precise you need to be with these kind of calculations?

Dave: Well, getting a pretty good answer fast and cheaply is always a good way to go.

Andrew: That you’ll actually use?

Dave: It can lead some tremendous insights right away without going through a lot of the mental, you know, sort of, brain damage of trying to find a precise number. So, I think, of customer lifetime value is a model as a framework before I think of it as a specific quantity. It’s not to say the quantification doesn’t matter, because having a pretty good sense of whether something positive or negative, that’s really good to know, if you’ve got a pretty good idea of the order of magnitude of value. Is the customer lifetime value in this particular channel $10,000 or is it $10? That’s helpful.

And when you’re comparing, you know, how to spend your time across different categories, it’s useful to have some, sort of, notion of force ranking what category or grouping is your most valuable customer, what’s your least. Those are good places to start you don’t have to get super precise to get that kind of information. At some point, you may conclude you need to go, you know, drill in a little bit deeper, but I would warn against trying to worry too much about precision right out of the gates. You know, try to figure out, “Wow.I wonder what range of pretty good guesses do I have a positive customer lifetime value?”

Is There An Easy Way To Use LTV Results?

Andrew: You know, we were talking about before we had gone on, you know, using sort of four wasn’t discount rates and applying those which are effectively, kind of, like, interest rates in a sense to discount things back. But maybe go on the other aspect, look at really simply, let’s say…I mean, I remember trying to do this for actual radios and just taking a very ghetto approach to, you know, looking at expert in the whole database looking at the email addresses, figuring out, you know, some of the email address was unique for a customer, figuring out how many times they purchased, you know, two or three year period their average purchase size.

And I came up with a rough number of revenue in any times that by a rough number if your profit margin and that’s roughly what, you know, your average customer is gonna be worth over the lifetime of their time with you. Is that the best way to do? What’s probably the best way of someone’s thinking about like, “Hey, I have two approaches like, you know, I have an hour this week that maybe I can dedicate to this.”

What’s the best quick and dirty way for most people to be able to do this where they can get an answer in an hour and get a sense of, “Okay, here is a number overall all I can work with.” And then maybe, you know, maybe apply that same approach to maybe there, you know, three or four different channels down the road to get a little more nuance. But is the approach that I, kind of, took is an okay one or should people be thinking about that a little more sophisticated perhaps?

Dave: You know, it’s interesting, in my own conversations, interviews on entrepreneurs, I ask them, you know, a recurring question about some of the most important things I’ve learned. And a significant proportion of people talk about how they wished they’d just started earlier. So, the application of the tool or customer lifetime value, you know, one of the biggest benefits is just doing it. So, I guess my answer would be whatever gets you off the dime and take 15, 30, you know, 45 minutes to ask these questions in a structured way is the best way.

Whatever that’s gonna get you started. Because it’s one of these things that you think you only got an hour for it, but if you find that it’s starting to yield interesting questions and prompting you think differently about your business, you’re gonna find, you’re gonna put all the energy into it that’s required.

The hard part is people looking, you know, staring blankly at some, sort of, complex summation formula and say, you know, “Screw that. I don’t have the time for that.” So if you just look at, you know, your gross profit make some estimate of what it cost to service a customer over the course of a year to remarket to that customer. You can make some pretty good guess of what the lifetime is gonna be, customer lifetimes aren’t infinite. People die. I mean, at the outer edges, but if you’re buying baby diapers, you can make a pretty good guess their maximum retention is gonna be four, five years. So you can spitball that and you can come up with a, you know, a reasonable discount.

You don’t have to worry about compound interest rate. Just say “Hey, a dollar today is worth more in a dollar in future so I’m gonna apply an 85%, you know, discount to one of my, you know, simple calculation is gonna be.” And then go to, you know, the point, is it positive or negative? Is it $10,000 or $10? And then when you’ve identified some of these components of the calculation that might be drivers of value over time, it inevitably prompts questions like, “What do I do? How can I tweak it? How can I change my business to make the value go up?”

LTV For Young Businesses

Andrew: What do you do if you’re five years old as a business, you’ve got a good amount of data, what do you do if you’re nine months old and you’ve got data, but, I mean, really for repeat customers especially let’s say your repeat customer cycle is, you know, gonna be about six or 12-month period you don’t have the data. Is it even worth doing this calculation if you’re that young?

Dave: Oh yeah. I mean you can still make pretty good guesses and you can make a range. You know, one thing I would advise is don’t get hung up on point forecast you’re gonna be wrong. Even if you have not gone into business, depending on your product and your market, you can at least come up with an educated guess about what your average customer relationship duration is gonna be. And have confidence and you can say at least, you know, “I’m 80% confident it’s gonna be within, you know, 18 months to 48 months.”

Run your calculations and figure out, you know, is tweaking the parameters gonna change the conclusion? Is it gonna change your behavior? If the answer is no, move on. You don’t need to worry about dig in deeper. If you find that that customer, you know, value is really strongly driven by your retention rate, you might want to take a closer look and start thinking about how you might capture information over time.

One of the nice things about e-commerce companies, for example, is you can measure effectively back into a duration calculation, you know, way that brick and mortar sellers would find very, very difficult. You know, out of scope of our conversation here but, you know, if it’s important it can be done even if you don’t have lots and lots of hard data.

You’ve Got Data. Now What?

Andrew: Let’s say somebody calculates their LTV or their multiple LTVs for different types of either customer types or channels, and they’ve got these numbers and they’re looking at them, what kind of, question should they be asking themselves about what they should do with this information? And how should this information inform…You touched it on a little bit at the beginning, but maybe if you could kinda could go through some of those different areas where they should think what should we be doing differently given that we know that this is our LTV for customers?

Dave: Well, if you go through the process of looking at the framework and understanding that there are multiple drivers of customer lifetime value, so it’s not just the customer acquisition cost, it’s not just the contribution margin, it’s also the duration of the relationship. It’s the cost and the perspective benefits of customer service and the marketing efforts, you know, the investments you make in upselling, cross-selling, spurring repeat purchases. Recognizing those in relationships is really powerful thing because then you can start asking questions about if I move one of these dials, how might it affect other things?

For example, there is a tendency in business to view customer support, customer success as a cost of doing business because we see that the cost of paying people to do customer support is salient. And the benefits are sometimes ambiguous. But to go through the customer lifetime value process, you start realizing that, “Wow, if I’ve got people on the phone doing customer support, that’s an opportunity to do cross-sells and upsells. If not that, it’s a way to help ensure that my customer retention might go from 24 months to 36 months on average over time. If I find a way to capture that information providing really great service, I may be able to use that on the front end marketing and actually lower my customer acquisition cost.”

So, recognizing the interdependencies of these variables rather than looking at an isolation is just a cost, you know, burden, or a source of revenue, it is really enabling and it helps you think about your business in a much more dynamic way and gives you a lot more combinations and permutations to draw upon to actually increase your value over time because that’s the ultimate objective is to increase your customer lifetime value.

Deciding on LTV As an Investment

Andrew: Let me give you hypothetical situation, and, obviously, that your decision on this would vary, I’m sure, on the number of variables and so I’m not expecting exact answer, more of a high level answer. But let’s say you had somebody who came to you and said, “You know, Dave, I’ve got a business and I figured out that my customer lifetime value is $500. I’d like to start advertising growing the business much more quickly. I’m capital constrained but I’m able to get some financing in order to pour into marketing. And, I think, that I can acquire customers at let’s say $300, $350 per pop for that lifetime value. The lifetime value recoups over let’s say two or three-year period, I think, I’m going to I’m strongly considering taking a financing to invest in marketing because, I think, my lifetime values longer.”

Do you think it’s a good decision? Like, do you think it’s good to finance growth even if your lifetime value, if it’s there but it will take multiple years to recoup?

Dave: The short answer is yes. The longer answer is it depends. And the person that came in to me that, sort of, our scenario, first, I got to want to do is I’ll, sort of, unpack where the number come from. What assumptions did you make? How confident are you in those assumptions? I mean, one of the experience I’ve had as a business analyst is creating very complex models and calculations and going through each of the assumptions and agonizing over it and then saying, “Yes, I’m pretty confident in this assumption.” And you add all those pretty confidence together can sometimes lead to a really absurd outcome.

So, I’d wanna say, “Okay, how confident are you?” And also go into their risk tolerance. I mean, different people…the answer is gonna be different for different people because, of course, you have special leverage and debt financing to your business amplifies the underlying risk. So, you may wanna phase how you do that, you know.

For example, before you mortgage the farm to go raise all that money to pour into advertising, you might wanna think about doing it in stages and finding a way to see if you can measure the effect and test whether your guesses about the drivers of customer lifetime value have validity in that scenario.

I’d also want to talk about what alternatives are there to increasing value? Is advertising the only investment you should make, or maybe it’s investments and customer success? One of the relative, you know, contributors to those different levers is make sense to do just one or maybe, you know a couple levers in concert.

Visual Framework For Getting Started

Andrew: You’ve put together some resource for people in how to think about this and even compute LTV for themselves at ecf.hsb.online. So, ECF for e-commerce field, HSB, humanscalebusiness.online. And can you just maybe quickly mention what those are if people who go there what they’ll find?

Dave: You know, there’s a PDF download that actually something I created for myself. It’s just a, sort of, visual framework for customer lifetime value. So if you’re not interested doing any calculations whatsoever, I think, there’s value in just seeing how, you know, sort of, the underpinning assumptions of this model, this framework. And second is a pretty standard Excel-based calculator that I put together that, you know, if you’re interested in taking that step, it can save your couple hours from putting the model together.

What Dave Does at Human Scale Business

Andrew: In human scale business,can you quickly remind people what it is? What Human Scale Business is and how or if you can help versus listen to this if they’re really interested in doing a deep dive on, you know, figuring out LTV and how it applies to their business, if that’s something you get if you help merchants with.

Dave: Absolutely. So, Human Scale Business is a consulting in business education firm that Laura Black and I own and run are, sort of, the bull’s eye of our target market, our founders of growing companies that design and make their own products and that are sold direct to consumer online. So, they tend to be small but inherently complex businesses. And we’re wonks. Were business egg heads. Where we can help is when people’s businesses are outgrowing their intuition and they need to take a little bit more systematic view of strategy in particular. So we can help do things like customer lifetime value and help translate that back into real decisions about marketing, sourcing, fulfillment, financing strategy.

Andrew: Right, thanks, humanscalebusiness.org. Again, the website for the LTV resources was ecf.hsb.online. And, Dave, you;re also a member of the forum, so if you’re in the community and you wanna ping him about any questions about any of this, feel free to. I’m sure he wouldn’t mind at all.

Dave: Absolutely.

Andrew: Let’s shift gears a little bit, and if you’re listening, we’re gonna move away from LTV a little bit to something that, to be totally honestly, is kinda, selfishly, something I wanted to ask you about. It’s something that’s been on my mind…Not sure how applicable it will be to everyone listening but might be interesting just from the e-commerce standpoint, and that’s, kind of, some questions I had about investing in e-commerce businesses.

I was hanging out with some good friends in the e-commerce space this summer and the topic turned to investing and investing in e-commerce businesses. And a number of them…They, kind of, really urge me to seriously think about trying to put together some kind of fund or systematically invest in e-commerce businesses.

If you look at ecommerce businesses, you know, up until a million dollars in cash flow, or even though I haven’t really look at it, a lot of times you’re only seeing multiple of 3x which, you know, 30% return even if you account for a salary in there for the owner, you’re still looking at returns that are much better than what you can get lot of times in the other market.

Flip side to that is you’ve got obviously much more risk, it’s a more opaque market. It’s much smaller, a lot of these different things. But the idea was to look for businesses in that, you know, let’s say, you know, $3 to $5 million range maybe up to $20, $25, $30 million in revenue and come to them, and not private equity in the sense of trying to invest in a company lever it up, improve it and flip it within five to six years.

But really with an investment strategy more focused on cash flow, on not permanent equity investment from people, but definitely much a longer-term, you know, not 5 years more like in the 10 to 20 year horizon, with the idea of being to try to come into those companies keep the management in place, you know, let’s say maybe take a 30% to 50% stake in the business and be able to provide capital, one, of course, but also, secondly, advisory services and connections which would something be something I try to do as well given my unique experience.

So, I wanna to get your thoughts on that. Is that something that you think…I mean, you’ve got a lot of experience in the private equity space, working with a lot of these small businesses. And, I think, as I found through it, I think, a couple of other things that success would hinge on would be, one, looking for companies with great management teams that had solid products that wanted to be able to take some money off the table to sell a portion of their business but still wanted to stay involved.

And then secondly, either that or companies in that range that needed financing and expertise but weren’t able to get that other places because, I think, it’s really the only two ways where I was running a company like that would make sense for me to be on the other side of that deal. Anyway, I, kind of, throw a lot at you there, but broadly speaking, do you think that’s a feasible…do you think it could work?

Investment Opportunities via eCommerce

Dave: I think it will work because the opportunities going to continue to grow. And given the need and the global scope, it’s going to attract capital. There are lots of people asking similar questions because it’s different. I mean, it’s not the same kind of situation that, you know, I and my colleagues faced years ago in doing, you know, roll ups. But businesses that are doing, you know, specialty retail or what we call human scale businesses that are niche producers of product are becoming a larger and larger component of our economy and there are some inherent tensions in the business models.

What founders of these companies tend to be good at is part development in innovation and developing a really keen sense of who their customers are in their niche usually because they came from that niche. They know it because they’re really a part of it and most of that how they can compete against larger companies with scale and scope. That said they, run into the issue of having to manage operational complexity and fulfillment, and ultimately financing. And those are all things that benefit from economies of scale and scope.

And the diseconomies of scale and economies of scale have a hard time living under the same roof. So, I think, it’s very likely that we’re going to see emerging forms of investment private equity that focus on that market and try to somehow bridge these incompatible worlds.

How that’s gonna be done…I think, people who hit on several of the issues, it’s gonna be fraught with danger for everybody involved, it’s how you marry that sensitivity to the customer and the innovation and product development comes from that with some of the demands of scale and scope.

Investor Stakes

Andrew: Do you think it’s possible to do that effectively to come in a traditional lesson sense and say, “We’re gonna be advisors for you. We’re gonna give you a large cash infusion units to help grow the business or to take money off the table for yourself,” if you wanna take, you know, maybe half of it, it’s like you bringing the business? Or do you think you have to come in with something more nuanced that could address the problem perhaps, say, you mentioned fulfillment, some of these other issues, where you have one umbrella, maybe you don’t own the company but maybe you have part of your value add would be saying, “Fulfillments are paying for you.”

We’ve got a huge 30,000 square foot warehouse here. Five of our other companies, they work out of them, we lease it to them at a very favorable rates. It’s got a photo studio, it’s got a filming studio. We have, you know, accountants on staff that you can talk to. We’ve got fulfillment. Of course, we’re housing all these kind of stuff. From a purely selfish investor standpoint, that sounds less attractive but obviously it adds more value. Do you think something like that would be necessary to make this work?

Dave: I suspect so. You know, I, too, you know, just naturally given my background, I’ve thought about there seem to be some interesting investment opportunities. But applying some of those, sort of, familiar investment techniques to a $3 million revenue niche producer, just starts to look afraid, you know, really quickly. To get some scope, to get some breath, to get some of the benefits of portfolio diversification without diluting a hell out of your focus, probably requires some element of operations platform, where the people on the product and the marketing are living and breathing, you know, their niche but they’re benefiting from an optimized fulfillment operation.

You know, you don’t have to reinvent that wheel. That can be done. You don’t have to find out where you’re gonna make your product videos. So, I suspect your intuition is right, that it’s gonna look a little bit like an old-school conglomerate. It’s hard for me to say because there are so much hair that comes with that, you know, concept but having an operating and finance platform and somehow marrying that to a dynamic portfolio of laser-focused product and marketing, you know, notes. It sounds hard but it sounds, you know, certainly plausible and maybe even interesting.

Headed to No Man’s Land

Andrew: If I was a 10…I’m not. I wish I was, so if I owned a $10 million-business, say, it has generated $2 million in, you know, leap it to up per year. And I wanted to continue running the business but I also wanted to take some chips off the table, I wanted to be able to let’s say cash out a little bit, take some money out of the business on the equity side maybe bring in some partners who could help out with a few things. Would I have a lot of good options? Is that a place where there are private equity firms right now or investment people looking to invest that would be interested and eager and take an investment in that stance for, let’s say, a 4-ish-x multiple? Or is that, kind of, a no man’s land?

Dave: I think it’s a no man’s land. In my experience, it’s more likely that somebody would just want to buy you and, you know, have you hit the beach. It’s tough to with that small level company to use that as an investment platform or a standalone investment. You really are increasingly in, kind of, a no man’s land somewhere north of the long tail of the distribution but well south of the fat head. So you’ve got the worst of all worlds in some respects.

Bringing In Investors Vs. Maintaining Control

Andrew: Are there many people like that? Like, I just used myself as example as a hypothetical but is that a scenario? Is that a common scenario? Or is it much more likely, in your experience, as you see founders, who either say, “I wanna keep bringing this 100%. I don’t want someone else coming in and tell me what to do.” Or they say, “I’m done. I wanna cash out.” Do you have many founders that are interested at that scale in selling it let’s say 30% to, you know, 49% stake in the business assuming they could maintain control?

Dave: Most of our clients are smaller than that. They’re in the below seven figures so they’re very much in the mindset of, “Wow. This is this is cool, you know. My years of hard work are paying off. And now, I’ve got the money to be able to do some things.” But they tend to be really energized about the business themselves and then what they struggle with is, “Do I wanna make a run across the no man’s land and build a $50 or $100 million business?” Or, they’re thinking “Well, this has been fun, but now I’m saddled with all sorts of managerial responsibilities that I don’t really enjoy and that I’m not very well equipped for. I really love product development. The operational headache of running fulfillment is just not my cup of tea, you know, is there any way I can get out of this?”

So, they tend to be looking to either, you know, lock down for the next 20 years or, you know, find a way to sell it while the revenue and cash flow ramp is still open to the right.

Andrew: And I’m kinda gonna be dipping back to your private equity days is that something you saw very often with owners on the larger side of the scale, you know, whether that’s…I don’t know exactly where that is, but I wanna say $50 million-ish. Do owners…I guess what I’m getting at is do you think there’s any opportunities or very many opportunities to be able to come in, take a meaningful stake but still have a management team and ownership team that’s still very much invested in the long-term success of the business? Or do you think that’s rare that people usually either all in or they’re ready to make an exit?

Dave: It’s hard as an investor to go in and just take a stake. You know, the work that I did in the past years ago was really I’m, you know, buying a platform doing a roll up. So there was one entrepreneur that fit that bill, but we would acquire the vast majority of the equity stake and provide the capital to go acquire, tuck in and grow the business that way. And there was enough financial return for the CEO, sort of, the keystone founder to make that game interested in an opportunity to really grow the scope of their operations and their experiences in a relatively small percentage of the business could translate into really meaningful value over time.

I have never really participated in an investment of a company in the eight or nine figures where it would be, you know, more of a, sort of, a venture minority stake. That’s hard for me to get my mind around, quite honestly.

Andrew: So, you go in, and the CEO or the owner would…You’d buy a majority stake as the investors, as a CEO, they would have a percentage plus a smaller percentage and they would still…Okay, the big difference would be you would take…it wouldn’t be minority stake, it would be majority stake that would be taking. And in those cases, would you…I’m guessing, how much would you and the firm you were working with, how much would you get in and really get your hands dirty in terms of the operations, bring people in, where were you mostly taking ownership making sure the leader had a really good set of structure and obviously advising but you weren’t, you know, the one really driving the ship? Was that more of an investment stake? Or, was it you were really in there, getting your hands dirty?

Dave: Well, I can only share my personal experiences which obviously are limited. When thing worked, I wasn’t that involved. In one particular case, it’s way back, our best bet for that managing CEO didn’t work out. And I found myself way above my head, you know, knee-deep in the operations of the business. And my role, at that point, was to cure our original sin by finding the right CEO and making that acquisition which we were able to do, we were very, very fortunate. But typically not. I mean, investors do investing. And while they have connections and know-how in personal experience, they wouldn’t be the people I’d turn to run my business.

Helping Big Companies From The Backend

Andrew: I had a friend this week, one of the same friends that we were, kind of, spitballing this back and forth with, you know, kind of, tongue-in-cheek said, “Hey, you know, Andrew, you should just find $50 million-companies that don’t have help desks and get them set up on that and you’ll instantly, you know, add a lot of value to some companies that are just enormous and atrociously unsophisticated behind the curtain.”

You, as partially being tongue-in-cheek, you partially being serious based on experience you’ve had. I’d love to be able to think that there’s a bunch of right opportunities out there to take companies at scale who don’t have great systems on the backend, swoop in for 18 months as the advisory or even get your hands dirty. Bring them back in, you know, into 2017 and be able have a graceful exit with, you know, a nice little return. But, I think, that, for some reason, that just sounds to clean and tidy and then I guess I’m suspect it was that many opportunities like that.

That was my intuition or my gut feeling. Would you share the same thing? Or, do you think there’s actually a lot of businesses in the mid-eight figure range that are just running on systems from 1960?

Dave: Man, it’s just two-fold. One ism I suspect that there are businesses out there…I know of some who have developed an interesting business but are in significant need of a rethink in terms of their process or systems to modernize and then to adapt to a very rapidly changing competitive environment. If you’re not using e-commerce automation today and making that a course out of your expertise, you really should.

That said, I think, your skepticism is warranted, you know, to come in and contribute how can you get fair value for that? And, I think, that’s a lot tougher I think you could probably help create value. But getting compensated appropriately, I think, is another thing. I mean, one of the things we’re just guilty of as human beings is we tend to internalize value very. very quickly.

So, the truth is that you can’t add value to a platform business without the platform being there. So, it’s very difficult to really discern how much value you contribute. I started, you know, early in my banking career I was working for Citicorp and I thought I was creating a lot of value. It was only until after I left Citicorp and put up my own shingle that I fully appreciate the leverage of that brand. Maybe my value contribution wasn’t as big as I thought it was, at the end of the day.

So, I don’t know. I’m more interested, I guess, personally, my bias has become find opportunities that are really worth a lot of effort, and then go execute on that, and put yourself in the position of getting an appropriate return. I have never found a way and it maybe just be my shortcomings to kind of find those clever finesses. It usually, you know, great ideas tend to devolve into a lot of hard work.

So, I guess I’ve become more sensitive to the question, “If this isn’t a good idea and it does devolve into really hard work, I might gonna be willing to do it for however long it takes.” It just tends to narrow down the range of things I’m focused on.

How to Split an Increase in Value

Andrew: It’s a great quote. I love that. Great ideas tend to devolve to, you know, lots of hard work. It’s funny you mentioned that being able to certain value and where that comes from there was someone who has a really interesting business that I chatted with last year. On a couple different occasions, we had serious talks to try to figure out where I could either invest in the business or come in for a period of time and really help, or do my best to try to take the business to the next level especially on the marketing side. And, I think, there was a lot of opportunity there for us both to be able to create something that was more than the sum of the parts, but the problem we ran into both times was kill the deal was we could not agree upon a way to be able to split that increase in value.

On my side, I wanted to come in and work for 18 months, two years at the most, and then be able to step away and have a long-term equity stake in the business. And, I think, for the owner it was very difficult for them to be able to see someone come in for two years and then be able to take money out of the business doing nothing going forward, which if I was in his shoes I probably would have a similar approach, but if in my shoes I’m thinking, Well, I’m more or less buying my equity, you know, with those two years.”

So anyway, the bottom line, I think, neither of us was right or wrong, but what I learned from that was it is…it’s very difficult to try to be able to set up. And this is from the outside, this wasn’t a year down the road had we done it, where there was resentment or people feeling like they got the wrong end of the stick and then you’re a business partner with them, you know. So it was interesting because that was a very, very tricky thing to do. And we didn’t do it obviously it’s what made it not happen, so…

Dave: You know, it’s mostly very difficult to do. I mean, it’s one thing to, you know, all pretend we’re economists and we’re gonna make rational decisions about value creation and splitting the baby. But when you’re a founder of a business, as you know, it’s really hard to see somebody…you know, it doesn’t matter how smart and talented you think they are to come waltzing in at your eight and talk about adding value. And you can still remember the sleepless nights when the wheels on the bus were awfully shaky and, you know, you were driving a 20-year-old car to make ends meet. It’s just, you know, maybe we shouldn’t, you know, let our emotions cloud our judgments in situations, but it’s naive to think what they won’t. They do.

Andrew: Dave, it has been a lot of fun. Dave Bayless, humanscalebusiness.org. Make sure to check out his work. He’s got a lot of interesting posts and information about, you know, just thinking about how to grow your business, how to optimize it. Rally cool stuff. And, of course, he and his partner, Laura Black, offer advisory services. If you enjoyed what we’ve been talking about and would love to know going deeper on some of these issues, not the ones that actually per se about investing but, some of the other ones we talked about, lifetime value, previously, or just getting help strategizing with your business to be able to take it to the next level, especially if you are a creator and someone who’s making unique individual products, Dave is a great guy to take to. So, Dave, thanks for coming back.

Dave: My pleasure. Thanks for having me.

Andrew: Want to connect with and learn from other proven e-commerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight-knit embedded group for store owners with at least a quarter million dollars in annual sales. You can learn more and apply for membership at ecommercefuel.com. Thanks so much for listening and I’m looking forward to seeing you again next time.

Custom Email Subject Line: When the Phone Rings at 2 am This year a member posted in the eCommerceFuel Forms that they received a call at two in the morning. Never a good sign. Their warehouse was on fire and it took them 18 hours to put it out. The entire building and everything inside was [...]

This year a member posted in theeCommerceFuel Forms that they received a call at two in the morning.

Never a good sign.

Their warehouse was on fire and it took them 18 hours to put it out. The entire building and everything inside was a total loss.

While they were insured they didn’t have anywhere close to enough coverage to compensate for the destroyed property, inventory and lost income.

So….. How’s your insurance looking?

If you’re like most people (myself included) you’re likely underinsured in some pretty key areas. Which means the wealth you’ve worked hard to earn and save is at risk of evaporating.

I asked Andrew Egenes and Phillip Naples from Unbrokerage.com to join me to talk about what types of eCommerce insurance store owners need to protect themselves to help insure (pun absolutely intended) this kind of thing doesn’t happen to you.

Andrew Y.: Welcome to the eCommerceFuel podcast. This show is dedicated to helping high six and seven-figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow e-commerce entrepreneur, Andrew Youderian.

Hey, guys, it’s Andrew here, and welcome to the eCommerceFuel podcast. Thanks so much for tuning into the show, and today, Oh, do we have a sexy topic for you, insurance. All right, I may have lied, this may not be the most…the sexiest episode you’ve listened to all year… But can I give you a promise? It might end up, turn out to be the most profitable one for you. Take, for example, one of our four members in the private community this year who posted about how their warehouse burned entirely to the ground. And he didn’t have ample insurance to cover it. So they lost on not just the building, but on the inventory.

So, I mean this is serious stuff, and the thing that’s funny is it’s… it’s not very… it’s kind of a pain. When I first start shopping for insurance for my business, I don’t even know where… Like you know, where to get car insurance, right? There’s AllState and Progressive. Where do you go to get general business liability insurance? It’s not exactly a transparent industry where you know where to go when… There’s a lot of things you don’t realize are a risk either…Like I think there’s some things that are racket in insurance world. One thing I didn’t realize about was…that we’ll talk about in the episode was, if I have an employee, if Laura, the Community Manager for eCommerceFuel, if she is, you know, she’s driving down to Boston to take a flight ECF Live in her own car, which I don’t own, but it’s on a work trip and she plows into somebody, I’m on the hook for that. But if I have general liability insurance, unless I have the special clause called non-owned auto or something like that, right, then there you go, my parent company. Then you know I’m on the hook for any damages potentially if they sue us so.

Anyway, there’s a lot of things you don’t realize that you’re exposed to. And knowing which ones to self-insure for or ignore, and which ones are important, it can be tricky. Anyway, that’s what we talk about today. I’m joined by a couple people to really dig into this.

Andrew Egenes is from really the early days of the forum. He was one of the first 30 members probably back when I launched in 2013. He used to be in the e-commerce space, owned his own business, has since left and co-founded unbrokerage.com with Phillip Naples. And Phillip has an extensive deep back on the insurance world. So between the two of them, they really understand the pairing of insurance and e-commerce. So, we get into all the different kinds, you know, the auto stuff I mentioned before, of course, your stuff like property. We talk about that, like cyber policies. We really get into a lot of the different things. We should be thinking about how much roughly they cost, which ones are most important, and where your risk… really, you know, where your risk probably is most acute.

So, hope you enjoy it and again, like I mentioned, this may not be a blockbuster episode in terms of action and crazy things but like I said the top, may just turn out to be the most profitable episode if something bad happens to you that you listen to in a while. Hope you enjoy.

The Meet Cute

Andrew Y.: Well guests, maybe Andrew, you can start. What was the story with how you guys met? You mentioned it’s a pretty entertaining one, I’d love to hear it.

Andrew E.: Yeah. So, you know, when I started my first company Shoplio, back in 2010 which you know, ultimately turned into a successful e-commerce company, it was the first time I had ever gone into business for myself. And you know, like every first-time entrepreneur, you know, you’re optimistic, you’re going to defeat the odds and you’re going to figure everything out on your own as you go, there’s nothing that you won’t be able to figure out. And so I operated for you know, a good year where I was working out of my house, my business partner was working out of his house. And there wasn’t really anything that triggered a need for insurance, that was until we decided actually kind of grow up and get an office, start hiring employees, so on and so forth.

And truthfully, I can say this, insurance was the first thing… You know, we had figured out financing, we had figured out accounting, we had figured out legal. And insurance was the first time when we realize we were going to have to turn to someone else to figure this out because it’s just too difficult, and it’s too complicated and we don’t understand it. And so ultimately, what happened is Phillip was one of the only insurance brokers, commercial insurance brokers that would return my phone calls and my e-mails. I happened to you know, share some interests with him as well. And so ultimately, you know, with Shoplio, we ended up buying our insurance through the agency that Phillip worked for, stayed with him for three years, but because the insurance industry is the way it is, I finally just got fed up with it and ultimately ended up firing him because I was tired of managing and dealing with insurance the way that I had to deal with it.

And there was nothing at the time that Phillip could do about that. You know, his hands were handcuffed. So I have three great years of working with him. He did a great job given the circumstances that he had to work with but ultimately I just couldn’t… I couldn’t continue dealing with insurance the way I had to deal with it.

Andrew Y.: But bottom line is, you in the past had fired your, now co-founders? Is that what you are saying?

Andrew E.: Literally, Yeah, I fired Phillip and then we’ve come full circle, we’ve made up and you know, we’re on good terms now.

Andrew Y.: Phillip, how long of a forgiveness period was that? Did he have to like court you back? What did you do to get back your good graces?

Phillip: In my good graces? I mean, I needed help, and I knew he could solve it. So I just kept in touch with him and you know, stuff like that happens in the insurance industry. You get fired one month, one year, you’ll maybe pick it up a couple years later just because it’s bought and sold like a commodity. But, yeah, so literally when I formed UnBrokerage, I was just kind of testing the model. I knew that marketing, kind of product development were all going to be hugely important to this and I’m… You know, I’m an insurance guy, I’m not a tech guy by any means. So I just ran it by people who I knew were, you know, smart in areas where I wasn’t. You know if you look at our board, on our Board of Advisors on the website, two of the guys on there also fired me too. So I tend to have a lot of… I’d say second at-bats if you will, where we’re doing better than the first time.

Andrew Y.: We’re going to get in here in just a minute to all the different types of insurance that people should consider having or not consider having, whatever the case may be. But I’d love to know I mean, you were in the industry for a long time obviously, started UnBrokerage to combat some of the issues that…the problems that you saw. What do people who aren’t in the industry…what do they not understand about how the insurance industry works? Especially maybe some of the problematic issues, you know, how… What are some of the major problems in the ways that consumers are getting ripped off? If they are, ways it doesn’t work efficiently or you know, things that they just don’t see that are behind the scenes and in that whole world?

Major Problems for Consumers Getting Ripped Off

Phillip: Yeah. Yeah, sure. So I wouldn’t say people or companies are getting ripped off. That’s not to say there aren’t some sleazy insurance brokers out there, but those guys are so far and few between and that’s not a real problem. The big issue really is that most individuals who are looking to buy commercial insurance for the first time or you know, early in the first time of purchasing insurance view it a lot like what personal-line insurance? So like your car insurance, your house insurance. Is like where you can go online, fill out a quick application, they can pull up NVR records or property records and say, “Here’s your quote and here’s how you can pay for it. You pay with a credit card.” That really does not exist in the commercial space.

Dependent upon the type of business you run, there could be 50 to 60 different types of rating factors for each type of insurance you need to purchase for your business. So that’s just a long-winded way of saying that most people’s experience purchasing insurance is on the personal-line side, and that does not translate very well to the commercial side. That we’re trying to change that, and we’ve been successful in changing bits of it so far, but it’s a long road ahead where it’s going to be as simple as buying car insurance for your car as it is to buy, you know, a full business package for your organization.

General Business Insurance

Andrew Y.: Let’s start diving the some of the actual… because I’ve got a list of you know, oh man, what’s close to… close to ten of these here. There’s so many different types of insurance that you could conceivably have as a business and so I’m going to be kind of, let’s approach this if you guys will with me. With the, let’s say the mindset of someone who’s got an e-commerce business that’s doing about $2 million in sales, they have inventory, they have a team and kind of so that maybe you know, hypothetical customer mind. And I’ll start with general business insurance, if that’s even the term, you will probably have to correct me a lot of these terms. But general business insurance, I know I have a policy that it’s just kind of general liability. So can you give me a sense? Is that… What is that called? What’s the technical name for that and what normally does that cover?

Phillip: Yeah, so general business insurance, most people are thinking of general liability insurance. For an e-commerce company, what that is going to provide is two main things. So, if this is a hypothetical $2 million a year company, let’s say they have $500,000 worth of inventory in other property values, most likely they need to rent some office space or warehouse space. So the landlord’s going to require that they have a general liability policy because there’s a coverage section in there that will pay the landlord back in the event that you know, you burn the place down by accident or you caused some sort of damage to it. So that’s going to be triggered by the lease agreement.

Now, the other piece to it, that’s in general liability that’s probably most important to businesses like this one is a product liability portion. So if you are selling an actual product, you manufacture or selling a product that you maybe source from overseas, you are going to be viewed as the manufacture of that product and if someone is injured in the course of using that product, the product liability portion of that policy would respond to pay defense costs and protect the entity.

On the flip side, let’s just say you’re a reseller of it. The product liability…You could still be brought into a product liability suit. So, for example, you’re a reseller of milk and your refrigerator kind of goes caput and the milk goes rancid because it can’t be kept at a cool enough temperature, causes someone harm after they buy it. Well, you’re actually at fault for that. So that product liability portion will actually go into effect to protect you and your business against your failure to keep that product at a consistent temperature. The rating factors for being a manufacturer, as opposed to a pure reseller are different. Obviously, the manufacturer rates are going to be much higher because that’s where the buck stops, there’s no one beyond you who can make that third party whole. Whereas the reseller could still be brought into suit, even if they did nothing wrong, simply because they brought it or because they sold it. And therefore the rating factors for that particular type of product policy is less.

But the two main things for this hypothetical company and the GL policy really is just the fire legal, to pay the landlord back in the event you damage the premise and then the product portion of the products that you are selling online.

Andrew E: Yeah and that’s… I just want to reiterate Andrew real quick with Phillip’s staying there. So, there are standalone product liability policies and we can get to that later but you know, one thing that’s going to be important for an e-commerce business or retail business, in particular, is that a lot of times, there is going to be some form of product liability coverage bundled with that general liability policy. And so, you know, business owners should make sure that they’re not purchasing a standalone product liability policy if there already is protection provided through that general liability policy. Now there can be exclusions and things like that. But an entrepreneur that’s not savvy or business owner that’s not savvy, could end up purchasing you know basically redundant product liability coverage if their GL policy already provides it.

What General Liability Covers

Andrew Y.: Makes sense. How do you know on the portion of your general liability that would cover let’s say a warehouse? Paying your landlord back, that could be you know, probably covered by the value of the building, that’s a little bit easier to figure out or understand your liability for. When it comes to understanding how much you might be on the hook for a lawsuit that comes because somebody accuses you of your product doing harm, that’s something… that’s a much more difficult thing to even try to understand if you’re not in the, you know, the legal or the or the insurance world. How should people think about how much to buy because I think a lot of times I’m guessing myself included when I got that policy, I just probably picked a number out of thin air and said, “There, I should do this.” Or maybe it’s what my net worth is. I’m not sure. How should people think about that?

Phillip: Good rule of thumb is to always remember, no is going to sue you for less than million dollars. If they feel like your product cause them harm, they are going to sue you for more than a million bucks. And I’m talking like, bodily injury harm. The GL policies come standard with a million bucks. There are some random carriers who will provide less than a million dollars, I just kind of avoid those all together. But any major you know, national or global insurance company that’s providing the GL policy, the standard is going to be one million dollars per occurrence or per event, up to $2 million per year.

So you can have multiple, multiple claims that all add up to $2 million as long as no one claim is above a million. This is kind of jumping down a little bit. But let’s say, you’re a 15, 20- million-dollar-company and you’re selling a bunch of products. Well maybe a million dollars isn’t enough, and the way to increase those limits is to buy an umbrella policy. So the umbrella can start at a million, it could go all the way up to a couple hundred million. So you would probably want to stay… If your company is growing, you probably want to consider going with an extra layer of protection above the general liability and product liability with the umbrella.

Umbrella Policies

Andrew Y.: One question, why wouldn’t you want… Why go with an umbrella policy which is a different type of policy, and we can get into the details in a minute, versus bumping up the level of your general liability? Why…Because it sounds like you’re saying, just that general liability usually caps out the one or two million but don’t bump but just go with an Umbrella.

Phillip: Yeah it’s less expensive to go with the Umbrella.

Andrew Y.: Yeah and that’s probably what you were going to say something. So maybe that’s a good transition point for getting to the umbrella, so umbrella is just… What does it cover in general versus the general liability?

Phillip: So most umbrella policies are what’s called follow form. All it does is it follows the form that’s underneath it so the general liability, however that reads, and we’ll just pick up what the general liability falls off. So you have a million dollar GL policy and a $5 million umbrella. You have a product liability claim and you get sued for $5 million dollars. A million comes from the GL and then four million comes from the umbrella.

Andrew Y.: Interesting. And can you have an umbrella that applies to multiple things that say like, can you have one umbrella policy that extends to your general liability and your car insurance and your property insurance and your cyber insurance? Or do you have to have an umbrella for every single individual to have a policy that you have?

Phillip: No, you can package them. So the umbrella covers the liability portions, so general liability would cover that. If you had auto liability, it would also sit on top of that same, same policy form. They share that $5 million limit that’s within the umbrella, so that same claim where we just paid out $4 million in the umbrella, well now there’s $1 million left that’s also sitting on top of your auto liability or some other liability-type coverage you may purchase.

Property is not a liability policy. You have to schedule the exact amount of property values that your company has. So if you just buy, you know, $200,000 but you really don’t know how much property you have, that’s the only way to get the full use out of your property policy is to make sure you have a good understanding of what your fixed assets look like. And then you just increase that as high as it needs to be. Cyber liability, which is a great, great mention as well has a different type of trigger and we don’t need to get too deep into that. But all you need to know is an umbrella can’t sit on top of a cyber policy. A cyber policy, you would actually increase limits to however high you need them to go.

Covering Inventory

Andrew Y.: What about inventory? Let’s assume that that hypothetical store we’re talking about, and you’ve got let’s say half a million dollars that the inventory sitting in the warehouse. What kind of insurance covers, if any? I’m sure there are some that does but, what kind of insurance covers that inventory in the warehouse and also when it is coming over on the boat? Let’s say they imported from China or somewhere else overseas. Is that something that is going to be covered normally by sort of property policy? Would it be covered by a general obligation? What do you need to do to make sure if you have inventory, it’s protected?

Phillip: Sure, great question. So if it’s in their location, in their business location, they simply schedule up with the property values in that location. Anything that happens in there, short of like flood or perhaps an earthquake, if it’s in a specific region will be covered. So fire, theft, when let’s say that sprinklers in the building go on and it damages the property, those are sorts of items that would be picked up. If you live in California, you probably need a separate earthquake policy to cover for the earthquake exposure. And if you are in a flood zone, you need a flood policy to cover the flood exposure.

As for it coming over you know, overseas, being shipped overseas, first you need to just understand who owns that property. Do you own the property the second it’s loaded on the boat in China for example? Or do you own the property the second that inventory is offloaded from the boat to the truck or from the truck to your to your building? Larger organizations will typically own that property the second it gets loaded onto the boat in the country that it’s being manufactured in and then they carry the liability of making sure that property gets to their location.

If that’s the structure you have, then you need what’s called a cargo policy or marine policy. It’s basically a property policy form that covers a property anywhere it goes, pretty much in the entire world until it changes owners to a customer or until it’s offloaded into your warehouse in the U.S. Does that make sense?

Business Income Insurance

Andrew Y.: Yeah, absolutely. What about business income insurance? Like, what percentage of businesses and to what extent is important to protect against, you know, let’s say you know, something happening unforeseen of course where it doesn’t do any… You are not being sued. You haven’t lost your assets but for whatever reason, you can’t…Your business isn’t generating income for six months. Is there a policy for that and what does that look like?

Phillip: So if the company is not generating income for six months because of a covered loss, a covered peril, there’s business income. So for example, a hurricane floods your building and you are spending the next year kind of, cleaning up and getting ready to do business again. So your property policy would respond and say, “You know, we’re averaging $20 million a year, right? We cannot sell anything because we’ve lost all of our inventory. We’ve lost all our building.” And they it pay you your monthly income until you get up and running, usually, up to 12 months is what most policies these days offer. And then there’s an extended business income limit that goes beyond that.

So after the 12 months, and after you’re back up and running again, your sales still aren’t coming in as fast as they were before because you’re having to go re-acquire those customers. So provides you with additional income to make sure you are whole throughout the next 12 to 24 months, whatever you choose. So that’s the most common type of business income coverage. With an e-commerce company, they have one more facet that makes a little bit more challenging and that’s in the event that someone’s able to, let’s say hack into their e-commerce site and shut it down. I mean you can’t sell if no one can access your site and buy a product from you.

There are what’s called electronic business interruption policies that are usually packaged within a cyber liability policy that perform the exact same way. It will pay you the lost revenue you incur during the time frame that your system is down and then once your system is back up, there’s still the potential to receive an extended amount of electronic business and income revenue from the policy until you are back to the position you were at prior to that data breach or hacking event.

Hurricane Coverage

Andrew Y.: And you had mentioned the hurricane one as an example. In that kind of situation, is that something that a property policy would ever cover or would the property policy really only cover the cost of the fixed asset, the real estate and you’d have to have a separate income policy to cover the loss of income for those 12-plus months?

Phillip: Short answer is the property policy would cover both the inventory and property amounts that were lost from the hurricane and it also provides a specified limit of lost income during a specified time frame, and then once that timeframe expires or the business is back up and running the way it was prior to the loss, it will provide an extended amount of income. So it’s all packaged into one form. Now, dependent upon where you live and the type of exposure you have from being hit by a hurricane, the policies that are available to you may not be that broad, but you can still create a solution that accomplishes the same thing with multiple policies. So basically saying, you could have a standalone property policy. You could have a standalone business income policy, and you could package it all together so that works the same way. The only reason they’re being split up is because in that particular region, the potential for loss is so high that they need to be rated independent of each other.

Andrew Y.: Yeah, like which is why you mentioned earthquakes in California for example.

Phillip: Exactly.

Car Insurance

Andrew Y.: Got it. What about car insurance? I think most people are really familiar with how you buy car insurance personally. We’ve all done it. Is there any… I think the best question to cut through things is, is there really any big difference between buying car insurance personally versus for your business?

Phillip: Well, a little bit, yes. First, we need to determine, does the business actually own the vehicle or do you own it personally? If the business owns it, then the business should insure it, but that operates pretty much the same way. It would just be packaged within… It will be packaged in the commercial program. Even if the company itself does not own any vehicles, but you have employees or yourself driving personal vehicles or renting vehicles on behalf of the business for business use, the entity itself has its own exposure because they are basically allowing its employees to drive vehicles for work. So in that case, you simply need to provide a driver list of all the employees at your organization who are going to be driving for company purposes. So if your sales guy is driving around, if you are taking a package to go get it shipped at UPS or dropping off a check at the bank for a business purpose, all of those expose the business.

So if you run into a family of four, God forbid, you kill them, that loss is not going to be a million dollars and then that individual’s personal auto is not going to be large enough to cover that loss. So the organization purchases what’s called hired and non-owned liability, auto liability which essentially provides defense dollars and settlement dollars to pay for those sorts of events. And the umbrella would sit on top of this as well. So you’d simply get a million dollar auto liability policy and then increase your Umbrella by however much you think you need to survive a potential loss.

Andrew E: And I’ll add something here real quick Andrew if you don’t mind. So the commercial auto is interesting because at Shoplio, both my co-founder and I leased vehicles through the company. And like lots of business owners, we did not know that we needed a commercial auto policy in addition to our personal auto policies. One of the biggest misconceptions is that “Oh, my personal auto insurance covers me anytime I’m driving this car.” And you know, to Phillip’s point, someone’s personal auto limits rarely get to be enough to cover you know, a significant accident.

The one other thing I’ll add ,and I didn’t realize this until I purchased commercial auto insurance but it’s relative to other types of insurance, extremely inexpensive. So it’s a really small price for a company to pay for arguably what might be one of the biggest risks. I think Phillip ,correct me if I’m wrong, but that’s the second or third most common insurance claim that businesses across the board experience, is a commercial auto claim.

The Second Highest Event That Can Put a Business Under

Phillip: Close, it’s the second…It’s the second highest event that causes a business to go out of business because they don’t purchase it. So that again, that family of four that was killed in this you know, theoretical claim situation, if I was driving to go to a customer site and then they find out that I did that, they’re going to sue the entity. And the entity is going to be liable. My personal policy is $100,000 worth of coverage, that will all go to the injured party and then they’re going to come after the entity for five million bucks. And they’re going to win. Every single time, they’re going to win. If they don’t have this auto liability policy, it’s going to shut their doors.

Andrew Y.: So just to make sure I understand this right, so if you have… let’s say you have a business and you don’t want a fleet of vehicles per say, but let’s say your employees maybe occasionally run errands for the business, you would by what’s called a hired And non-owned liability policy, which will cover you for let’s say a million dollars. So they could drive their vehicle, but if they smash into somebody in the post office dropping off the package, you have that protection which will still cover you even though they will cover you when they were doing kind of an on-the-clock task but in their own personal vehicles, is that right?

Phillip: Correct.

Andrew Y: And what happens if let’s say, our $2 million dollar… That hypothetical store owner, let’s say he has… Let’s say he does own a couple…one or two vehicles that his employees, he at the business actually owns them and then they drive them. Would it still be the same type of… probably wouldn’t be the same type of policy. Would you buy what’s very similar to a personal policy for those vehicles and just list all of your employees on that policy or how would that differ?

Phillip: You essentially insure the vehicle through the business and during the the underwriting process, the carriers or an insurance company would want to know who has access to drive those vehicles. And you said the same, that here’s the driver’s list and the same people who drive their personal vehicles for business have access to these you know, two or three vehicles as well.

So in the event that one of those employees drives a corporately-owned vehicle and smashes it, the only real difference there is that our policies will pay to fix or replace the corporate vehicle that was damaged in addition to taking on all of the liability as a result of that car crash.

Andrew Y.: Great, that’s… I think of all the ones we’ve talked about so far, that’s the one that scares me the most because I realize I don’t have it all and I don’t… our team doesn’t drive around a lot. But I mean, there’s been dozens of trips, you know, here and there over the years and, yeah I hadn’t even thought about them smashing into somebody on that, one of those ad hoc trips and that’s so sobering to think about.

Phillip: Well, I know a guy who can get that for you so if you need some help, let me know.

Andrew Y.: Perfect. Wonderful, you have to give me his number after we get off here.

Phillip: Yeah. Sure thing.

Cyber Security Insurance

Andrew Y.: So, I want to move on to maybe a few of the more online, e-commerce specific ones. One that you kind of touched on already, we touched on already with cyber security insurance. And there’s a lot of things there. So, you know, things come to mind for me, one, getting hacked and you kind of mentioned being… your business being down and losing income because of that, that’s one facet. Another one, credit card breach, potentially especially if you’re storing credit cards and somebody hacks in credit card or any kind of customer. Customer theft of customer sensitive information would be one.

So you can give… give us a sense of what different policies are out there how broad is, you know, is there just a general cyber policy that covers all of this? Are there multiple ones and if so, which ones are the most important ones to think about?

Phillip: Yeah, sure, so there’s the basic core, I’ll say air quotes, cyber liability or internet liability policy which will cover two main things, one, a network security breach and two, a disclosure of private information, whether it’s personally identifiable information or corporate confidential information. So those two things combined typically respond in a manner which is generally viewed as cyber liability. So credit card theft, you know, let’s say health or personal identifiable information theft, bank account theft, all that would be… all of the liability resulting from those items would be picked up in a traditional cyber policy.

For an e-commerce site, that could probably work for most of the smaller ones as you grow then you can add in certain coverages similar to the electronic business interruption that we discussed. You could add in coverages such as cyber extortion where someone has actually penetrated your system and is trying to extort money out of you or they’ll release confidential information or they’ll shut your site down. There is, in many cases, a lot of e-commerce sites may design their website to look more like a larger organization and they could get hit with some sort of trade dress IP-type claim. There’s the potential of covering certain intellectual property items based on the way you present and you advertise electronically to your customer prospect base.

But as a whole, you would really just start with the foundational policy and if that insurance company has the ability to add on to it, then you could as your business grows, those are the other items you want to consider thinking about. There’s a new type of coverage which I wouldn’t quite classify…or newer type of coverage which I wouldn’t quite classify as cyber yet, although it does kind of operate similarly to the electronic business interruption coverage. And that’s the, you know, the suspension coverage. If you’re using an e-commerce platform to house or store and sell your products and then for some reason they believe or deem that what you’re selling or how you’re selling doesn’t comply with their terms of service and they basically shuts you down.

So there’s the newer coverage that has been coming on to the market to provide the lost income or lost revenue for those e-commerce sites in the event that they are suspended but suspended for a reason that’s not in line with what that e-commerce platform’s terms of service say. So it was a mistake on let’s say the platform’s side and it caused three months of downtime during the holidays which can be very, very detrimental to the e-commerce store.

Andrew Y.: And what was the name of that type of policy?

Account Suspension Insurance

Phillip: Is called account suspension insurance. We candidly and full transparency, we have not sold any of this, it is a new product, and I’m getting my hands wrapped around exactly how the triggers are and what the claims handling processes will be. I’ve not seen or heard of any type of legitimate claims that have been paid. So I’m a little…I don’t want to say I am against this policy or I’m not. I don’t want to promote the policy. It’s just so new and I don’t think the carriers and the underwriters quite understand exactly how to underwrite it appropriately. So I think it’s going to take some time to get some real claims to determine whether or not it’s a worthwhile policy meaning it’s worth the premium dollars you’re paying or if it’s not going to be.

Andrew Y.: And would Amazon suspension… One thing I’ve heard about kind of a little bit the last 6, 12 months is Amazon Suspension insurance. In case Amazon for whatever reason shuts down your account. A lot of people… You know let’s… Our $2 million store owner, let’s say 70% of its revenues on Amazon and that’s you know, they shut them down and that’s weeping and gnashing of teeth big time. Is that something that… Is that what I’m hearing about when I hear about Amazon Suspension Insurance or is there specialized policies just for Amazon in that case?

Phillip: There may be someone who sells it as Amazon Suspension Policy. I don’t know exactly, the ones I have seen have just been sold as e-commerce suspension policies. And then as you read into the fine print, it talks about how you are actually housing and managing your store through an e-commerce platform like Amazon or E-Bay or Pinterest. I do not know if Amazon is actually selling their own customized insurance policy. I wouldn’t be surprised if they try to figure it out, but right now, I think they have other things on their mind.

Andrew Y.: Be nice if you underwrite it. You know, be nice not to throw you guys under the bus really. But, you know, having it from them, it’s in their interest to keep you guys on the platform or keep whatever store or on the platform, you know.

Phillip: Yeah, absolutely.

Identity Fraud Insurance

Andrew Y.: What about identity fraud insurance especially with the breaches in the states that use Equifax and those issues, is that something like how big of a… is that something that you guys… I know that’s fairly affordable, but is that something that you guys sell, that you strongly recommend? What should we should be thinking about that.

Phillip: Yeah, so we do recommend these types of products. We do sell these products. We just released a new coverage form that it’s sold as an employee benefit. So your company would buy it for its employees. It’s relatively cheap, I think it’s 15 or 20 bucks per employee, per year. So I, you know, as opposed to taking them out to lunch one day a year, just buy this policy for them. But what it essentially does is it provides you with unlimited support to regain your identity back after it’s been stolen from some of it. In addition, now Andrew, correct if I’m wrong, is it $25,000 that it also provides in extra expense. So if there’s forms you have to fill out or if there’s transportation costs you incur, it’s going to provide a…

Credit Repair and Monitoring

Andrew E.: Credit repair or credit repair reimbursement, credit monitoring reimbursement, all those sorts of expenses that go along with recovering your identity.

Phillip: We highly recommend this, because it’s so inexpensive to buy and just with the, you know, with Equifax breach, I mean that basically affected half of America already. This is going to provide the individual whose identity was stolen essentially with one person whose sole job is to re-secure that identity. If you are to do it on your own, you’re probably going to spend 10 to 15 hours a week at minimum trying to jump through all the hooks and figure out how to regain your identity back.

Andrew E.: Yeah, you know, the one thing I’ll add here, so one of the models that we really like UnBrokerage is, we really like what we call off-the-shelf-products, point, click, buy. And maybe that’s my e-commerce background coming in because I really would love to one day be able to sell insurance the way I was able to sell products in my e-commerce days, but we do have some products in the identity recovery bags. One of them, where there’s basically no underwriting. We even have a cyber liability policy that is pre-underwritten, instant issue.

And so we’re working hard to introduce products that don’t require the business owner to spend a bunch of time, filling out a bunch of applications, going back and forth with carriers, so on and so forth. I think that’s what’s so unique about this particular identity theft product, is it’s peace of mind for employees, including the business owners and it’s significantly less expensive than credit monitoring and identity monitoring services that have a monthly fee. Those services provide you with insurance in the event that your identity is stolen, but you usually have to pay $15 to $20 a month to get this. This is $15 to $20 per year and you get the benefit of unlimited professional identity recovery services.

To Self-Insure or Not Insure

Andrew Y.: When does that make sense to self-insure or not insure? I mean I think about on the medical side, dental insurance. In my experience, maybe there’s some great policies out there, seems like the biggest rip off I’ve ever seen in the world. So, I mean, we don’t have it, people have and had it and it just seems like a racket.

Andrew E.: Vision, is vision insurance.

Vision Insurance

Andrew Y.: What’s that? I do not have vision insurance. You know, maybe I’m blessed with good eyes but it did sound like that may not be a big fan of… you may not be a big fan of those either. But so that comes to my, what if anything on the on the business side are things where the downside isn’t so bad, especially relative to the premiums or what you’re paying for, what you’re protecting against, isn’t that great of a deal? Or what areas should people start thinking about maybe if they can self-insure for a building? You know, obviously a lot of people… Maybe most people buy property insurance because you know, they’ve got a note or they’ve got a mortgage and they have to buy by law but at what point like if you look at the odds obviously, you know, something… So the chance of happening are so remote that if you can stomach the loss, maybe you should consider doing that. Where should people considering self-insuring or not getting insured at all?

Phillip: You know, I remember work comp insurance. So work comp is one we haven’t talked on. Most people are aware of it. The regulations vary by state but in general, usually, when you have three or more employees, that’s when you’re legally required to purchase work comp insurance. I chose with Shoplio to exclude myself and my business partner from our work comp policy because there were no steps going into our building, the floors were safe and stable, I wasn’t afraid I was going to slip and fall. I wasn’t climbing ladders to change light bulbs and so we kind of did a cost-benefit analysis and said. “You know what, the risks of us getting injured on the job are as about of low as they possibly can and so we’re going to go ahead and exclude ourselves from the work comp policy.”

I could see a lot of e-commerce business owners that work from home and you know are sitting behind a computer all day, the exposure to illness or injury is pretty low and so they’re probably going to choose not to get worker’s compensation insurance.

About UnBrokerage

Andrew Y.: Perfect, Is a great answer, thanks. Guys, can you talk a little bit about UnBrokerage, you know, why is it different? You talked about your story at the top, but what really makes it different? What do you guys offer? Why should somebody consider coming to you for their insurance versus one of the legacy carriers

Phillip: Yeah, so as the non-insurance guy, there’s a few things that are drastically different than the traditional insurance experience. The first thing and most important thing is we are providing access to the insurance market that large corporations get for small businesses. So traditionally small businesses, start-ups, first-time businesses have had a difficult time getting access to the same products that much larger established businesses get. We’re bringing that kind of enterprise, great access and making available to businesses of all sizes. One of the ways we’re able to do that is we’re also providing insurance the way that modern business owners want to purchase it. It’s available online, 24 hours a day from any device and human contact is optional. So, you can kind of think of us as the Turbo Tax of insurance and that we’re building an educational layer that walks business owners through the process of selecting the right coverage for their business, I would say third as we allow businesses to pay monthly with a credit card.

So because of the efficiencies that our technology creates and because we are enabling business owners to do this on their own and understand it and feel confident doing it, you know, we’re able to work credit card processing fees into our cost structures which traditional brokers just simply aren’t able to do. So you know, kind of in summary, we’re educating business owners. We’re allowing them to get exactly what they need. We’re not tricking them into buying coverage that they don’t need, and we let you pay monthly with a credit card which frankly that’s how business owners want to pay for their business services.

Andrew Y.: Great, it’s unbrokerage.com, I’m going to be heading over there this week to pick up a non-owned liability policy after this interview and some other stuff as well. On the insurance side, in closing, wrapping this up, if to be realistic, even if somebody is uninsured right now and they listen to this episode, they’re probably not going to buy everything that we discussed slash recommended on this podsy. If they were going to go… Let’s say that, let’s use that same hypothetical $2 million store owner, he’s got three or four employees, he’s got some inventory, he’s going to go out and buy one, maybe two policies as a result of this. So, you know, maybe from your perspective, you can think about it as where the biggest, you know, the biggest weak spots or vulnerable spots in his business. What one or two policies would you recommend they go out and buy right now?

What Store Owners Should Buy Right Now

Phillip: First, I would suggest instant-issue cyber policy. So like I said that one is, there’s no underwriting. You put your company name, your credit card and you have coverage up to $100,000 immediately, that’s 250 bucks a year. If they want to get a little bit more, I would say get the general liability policy to cover the products and cover the exposure of the location they may be leasing, and then get worker’s comp for or their… if they have employees. My guess is with the $2 million shop, they may have one or two employees. In the end of the day, all of those policies for $2 million company with a couple hundred thousand in property figures might be a couple hundred dollars a month. Throw on a credit card, you never have to worry about again, we’re just going to hit your card every month, you’ll have your policies and access to your policies whenever you need to. And again, we won’t call you unless you ask us to.

Andrew Y.: Phillip, Andrew, this has been great. Going to change some things that I do hopefully, it’ll help some other people get covered in some ways if they weren’t. Again, if you’re listening, it’s unbrokerage.com. And gentlemen, thanks so much for coming on.

Phillip: Thank you, sir.

Andrew E.: Thanks so much Andrew, appreciate it.

Andrew Y.: Want to connect with and learn from other proven e-commerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight-knit, vetted group for store owners with at least a quarter million dollars in annual sales. You can learn more and apply for membership at ecommercefuel.com. Thanks so much for listening and I’m looking forward to seeing you again next time.

Earlier this year I came close to buying a mid 7-figure business with a team of 15 people. At first, it looked like a diamond in the rough. A business I could purchase relatively cheaply, spend a short time improving and systemizing and then step back to enjoy significantly improved profitability. But after doing my [...]

Earlier this year I came close to buying a mid 7-figure business with a team of 15 people.

At first, it looked like a diamond in the rough. A business I could purchase relatively cheaply, spend a short time improving and systemizing and then step back to enjoy significantly improved profitability.

But after doing my diligence and talking with others I realized it ultimately wasn’t the right opportunity for me.

How could I have initially been so excited about something that clearly wasn’t the right move?

Today I share the 7 questions that prevented me from making a very, very expensive mistake…

Andrew: Welcome to the eCommerceFuel podcast, the show dedicated to helping high six and seven-figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow e-commerce entrepreneur, Andrew Youderian.

Hey, guys, it’s Andrew here and welcome to the eCommerceFuel podcast. Thanks so much for tuning in today. And today on the mic you’ve got only yours truly, flying solo. I love starting doing something today that I’d like to do on a regular basis maybe even as frequently as monthly depending on how you guys like this, and that’s just talk about…gonna do a shorter episode instead a full 30 minutes, maybe something more than 15-minute range about something I’ve been thinking a lot about or an experience that I’ve had that hopefully it’s gonna be applicable to what you’re doing as an entrepreneur and store owner.

And what I wanna talk about today is seven questions to ask yourself before buying a business. If you listen to the show regularly you know that based on a recent episode, you know, I spent the last six or seven months really trying to figure out what I wanna commit to going forward, taking a little time off. As part of that was deciding to whether or not to go full time on eCommerceFuel which I decided to do, but also during that period was deciding if I wanted to buy eCommerce business, another eCommerce business, you know, really do that.

And I looked at a number of businesses, a couple seriously, one very seriously where, you know, I went on-site, met the owner, met the team, was, you know, strongly considering making an offer. So that’s the business I wanna talk about today. I’ve had people ask me because not really a spoiler here that ultimately I did not decide to buy that. It was a difficult decision.

Almost Pulling the Purchase Trigger

It was a decision at first glance I thought was gonna be a home run purchase and, you know, people have asked me, “How did you work through that? Because there was so much there. How do you work through the process of deciding whether or not to buy business like that?” And so I wanna talk through the process I went through to ultimately come through the other side and feel really, really good about my decision.

So a little bit of context about the business. So I have been a customer of this business at some point and that’s how I got to know the owner. Just on the phone one time we were chatting and I mentioned to him that, you know, I was in the eCommerce space, he was curious. We started talking and built up a nice rapport.

And he kinda learned that I was gonna be out in his neck of the woods at some point in time and invited me to swing by and check out their operation. And so that kinda lead to, you know, planning a trip. And in the interim before I get out there, realized that the business potentially could be for sale. So that’s how the ball kinda get rolling on this. So high level details, the business was doing about, you know, kinda mid seven figures in revenue.

Margins were on the lower side, you know, probably about 30% gross margin. There’s a lotta overhead, a lotta overhead with the business and, you know, they have a team of about, you know, 10 to 15 people or so.

And, you know, at first glance I thought that there was a ton of opportunity there and here’s why. First, the team of people was phenomenal and they had a phenomenal reputation in the space. They were widely regarded as knowing their stuff, providing great customer service, and just being a trustworthy outfit. And that’s something that you can’t come and swoop in as, you know, a takeover turnaround cowboy and fix in six months.

That’s something that’s built on a long time and, you know, a long track record. And so that was very attractive. On the back end behind the curtain from a business perspective they had terrible, terrible systems. Their warehouse was very, very rudimentary. I remember, you know, they didn’t have room for everything, so I think when they opened up a lotta times they’d have to take some of the pallets out of the aisleways and put them in the alley to make a room to walk back and forth.

They didn’t have a purchasing system, they didn’t have an inventory system, they had no idea how much inventory they had. The owner had a rough idea. And I think when I asked him…the owner was incredible, really great guy, very trustworthy. He seemed, you know, obviously knew his business extremely well. But from a system standpoint they just were a little bit behind the times. I think I asked him, “How much do you have in inventory?” He said, “I’m not sure.” And I said, “What do you mean you’re not sure?” He said, “I’m not sure.” I said, “Was it…is it half? You know, is it X or is it Y?”

And he was, you know, didn’t know on a magnitude of hundreds of thousands of dollars which was in some sense shocking from an opportunity standpoint assuming he would come in and make sure you didn’t get hurt on the purchase side. That means that they’re not running optimally in terms of running minimal inventory and not even that, but a lot of their other systems in terms of, you know, placing purchase orders, dealing with vendors, things that were very ad hoc and causing a lotta problems could be streamlined with some great systems, and some great software.

So that, from a guy who likes operations and likes automation, and software seem like a huge home run. They didn’t do very much custom manufacturing, if any. So all their products were resold, where…so I saw a huge opportunity to come in, take stuff that was selling really well, have it manufactured, bring in-house and double your margin on it. And they had an incredible lifetime of their customers.

Their customers would often come and, you know, they’d come in and they would buy over and over and over again. So you can find great, you know, repeat customer lifetime value with a company that was well known for their reputation and their service. If you come in on the back end and really clean up the accounting systems and the efficiencies, and cut some costs, and increase the margins, you potentially have a home run there. So was pretty excited and I saw a lot of potential there.

What Is The Future of This Industry?

So the questions I started to ask as I dug really deep. The first one is, what is the future of the industry look like? And this was something where at first, I wasn’t too worried, but I should have been. And ultimately it was something that caused me concern. The product that they sold was for a product that…it’s not sold anymore and, you know, there’s still a lot of them out there, but they aren’t making anymore new ones. And so the need for the products that they sold related to the core product, they…there weren’t gonna be more customers coming into the market.

The ecosystem, the amount of the core products, you know, accessories for this product were limited. And at first I thought, you know, “It’s not a big deal how fast this is gonna drop off.” But the owner actually warned me about this himself, other people I chatted with warned me, and ultimately at the end of the day I decided that this is nothing, but a liability. Best case scenario, you know, you stay flatline and that’s not gonna happen. So the future of the market was not strong, there was no upside which was a concern.

What Level of Working Capital Is Needed?

So the second question was, what level of working capital is this business going to need to grow? And for this business it turns out they had a tremendous amount of inventory relative to the profitability of the business on a factor of 4x. So like let’s assume for the sake of argument that the business generates a million dollars in net income, they had $4 million in that case in inventory which is just an insane amount relative to how much money the business makes.

I haven’t seen…I’ve seen very few businesses that have that much working capital, that much capital inventory required to generate that little amount of profitability. And they turn their inventory, you know, we didn’t know how much they turn their inventory because, you know, they can have their system set up. But you can roughly tell based on their sales, they turned it probably at least three maybe four times a year.

But just their margins were so small that…and they had so much overhead that, you know, it was…that’s kinda how it penciled out. So that scared me and some of the things I wanted to do to decrease the overhead, to improve the margins, I thought I could make a big bite into that. But I was starting in really, really deep level on the hole. Needed a tremendous amount of working capital, and that’s scary.

How Were The Gross Margins and Could They Be Improved?

Number three, how were the gross margins and how hard would they be to improve? So the margins were not awful. They were lower than what I would have assumed for a company that stocks all their products, but they weren’t atrocious. They were on the low side though of, you know, what I was expecting. But I figured, “Hey, you know what, this is probably a big opportunity. I can come in here and look at their top 10 to 20 selling products that probably make up 80% of the revenue, have been made in-house, have them manufactured, double or even triple the margin there and I can bring up the gross margin substantially.”

That was what I was hoping, but when I really dug into the process behind doing that, what I realized was there wasn’t that 80/20 relationship that I was expecting with the top products. It was more like a…their top 20% of their products made up 32% of their revenue. So it was an outsized amount, but not nearly the amount I was planning on. And bottom line what that means is I could go through and manufacture those top 20 products and it would boost the margin, but not very much.

To boost my margin really to double that, I’d have to go out and probably manufacture half if not more, you know, if 75% depending on the, you know, the distribution of the product sold, I’d have to manufacture a tremendous amount of the catalog and they had an enormous catalog. So I quickly realized that trying to manufacture that many products was gonna be a nightmare. That was a big concern.

Can I Personally Add To This Business?

Question number four, am I uniquely qualified to add value to this business? So originally I thought it was and, you know, my skills are in marketing, systems, and software automation, community building, and eCommerce. And so looking at there’s three, you know, really three big areas where I was gonna have to come in and hopefully add value. On the operational side and the automation side, yes, I think I coulda strongly added a lotta value there.

On the manufacturing side, no, I don’t have a lotta experience on the manufacturing side, very little. And I think that woulda been important to get the business to where I needed to be. And also on the team leadership side, you know, the biggest team I’ve ever managed has been about, you know, three, four people in-house with let’s say, you know, seven or eight contractors. That’s very different than having 15 people in-house.

And, you know, obviously I could have done it, but it wasn’t something where I think I…there woulda been a steep learning curve there. So sitting down and being honest, I could add value in some areas, but, you know, definitely only one out of the three.

Question number five I asked was, am I ready to spend the next three to five years focused on this? And coming into this opportunity I kinda had this very utopian idealistic plan of coming in, hitting the ground, spending 12 to 18 months really turning this thing around, increasing the profitability by 3x, and letting it run on its own. And, you know, going back to wherever I wanted to be, whatever I wanted to do, and kinda just letting it be a passive asset, maybe with some strong management in place.

And talking with the owner, talking with some other people I quickly realized that when I was honest about it and you apply the factor of how long things actually take in the real world versus how long you plan on them taking, I think this would have absolutely minimum been a three-year project, full-time, much more likely a four to five-year project. And I wasn’t willing to commit to that, I wasn’t ready to commit to that, or at least that scared me a lot more.

It was a much harder thing for me to wrap my head around. So that was something that was a little bit sobering as I was, you know, getting much closer to seriously thinking about making an offer.

Is This A Good Lifestyle Fit?

Number six, is this opportunity a good cultural and lifestyle fit? And for me this wasn’t something, again, I really thought about until I was, you know, the rubber hit the road and I was considering writing an offer. I was gonna have to uproot my family for a couple years when I’ve got two young kids. Was gonna have to move to a place where I didn’t have community and that was, you know, significantly more expensive than where I live now.

And also I was gonna have to take on a team of 15 people, potentially have to layoff a lotta those people, have a team leftover that was dealing with the fallout of a layoff. Because I think with the systems that we put into place, there was gonna be a decent amount of, it sounds brutal, but part of the plan would’ve had to be to cut the overhead, cut the staff, and automate some of that things…some of those things. All of that sounded terrible to me.

Nate gave a great talk at the last ECF Live talking about how this is something that he did not fully consider when he made the move from his home in California out to I believe Atlanta, the Atlanta area to buy and run a business and how it was something he wishes he would’ve thought more about, and he didn’t realize the impact of that. If you’re a community member we’ll go ahead and link up to his keynote which is available in the forums. Great talk if you didn’t attend the Live events, and that kinda came back and stuck with me.

What Do Smarter People Think?

And then finally, last question to ask was, what do smarter, more experienced people think? You know, I sat down and had lengthy discussions with at least three people who either had experience in the space, people who were…had experience buying businesses or had seen a lotta businesses and then worked in the investment space and the property equity space before. And those were immensely helpful, you know?

A number of these issues that I just talked about came directly as results of those conversations, or they took things where I didn’t think they were issues that were on my radar, but I wasn’t worried about them and made me really think through them more seriously as potential, you know, deal breakers. So that was tremendously helpful. Kinda goes without saying, talk to smart people, get a second set of eyes, or third or fourth or fifth in my case on the deal, but was tremendously helpful.

So, for me I obviously ended up passing that deal, but couple of things I learned from the whole experience. One, if you have a super capital intensive business, that is brutal. It’s brutal from your side because you’ve gotta go ahead and cough up all the capital and it’s not capital that you can use, it’s just capital that’s stuck in the business. And the second thing is it kills the multiple on the business.

If you ever try to go sell that business, you can sell it, but you won’t get most likely the going multiple for it, and if the offer I was gonna make and any offer I think would’ve been accepted by this owner would’ve been far below like your standard 3 to 4x multiple for business just because there was so much money needed to run this business. So that was one thing that I thought was interesting that really kinda hit home.

Another thing was it’s always a good idea either in terms of just meeting interesting people or having kinda serendipitous opportunities come your way to get to know the owners of businesses either in your area or that you have purchased from in the past that you think are interesting. You know, I had a great relationship just kinda even now, like the guy who owns it now, I still…we’re on very good friendly terms.

And I’ve offered to help him in the future, you know, when he does sell the business and if there’s any way I can add value there. But you never know, like, introduce yourself to businesses that you come in contact with and there’s some cool opportunities, if nothing else a great friendship that can come out of that.

The Right Decision Isn’t Always Obvious

Another thing I learned is the right decision isn’t always obvious. Lotta times it can really take a lot of time in terms of bringing a lot of the data together and kinda just letting it sit and marinate for awhile in a crock pot. And a lotta times you gotta really dig deep into this stuff, do your diligence to be able to either get into a deal and feel great about it or walk away with no regrets. You know, I’m here months later, zero regrets about passing on that deal. I am, you know, 99% sure it was the right thing to do.

But had I not spent the three to four weeks really doing a deep dive, I don’t know if I would’ve felt that way and I could’ve had that what if, did I pass on one of the best opportunities I’ve ever seen?

Large SKU Businesses Are Tough

And then finally, the last thing I learned is large sku businesses are brutal to run. I mean, I think about this guy’s catalog, he had thousands…I don’t know about thousands, but probably thousands, I think yeah, he did. I’m visually walking through their warehouse, there were thousands of products in there, thousands of products in his catalog, and that is just a tough business for a couple different reasons.

I mean, the capital constraints are one, but, you know, you gotta have…you gotta stock so many more things even if they don’t sell very well, you got more…either on one side you’ve got more dealers you have to purchase from, or you have more products you have to deal with the manufacturing on. Just, it’s just tough, especially for, you know, kinda who I am, a smaller entrepreneur in that, you know, seven figure business range, or at least aspiring now since I sold my other businesses.

Large sku businesses are hard, they’re tricky and starting one from scratch, you know, that was on my list of attributes, looking for a business with fewer products. But man, looking at one in person just really drove home the difficulties and problems that, you know, having a lotta skews brings in.

So, that was my experience thinking through, and it was a really fun exercise. And, you know, hopefully you got some…a few nuggets or a few things out of my experience in the way I thought through this process. But yeah, glad that I did it and also glad that I, you know, made decision that I did as well. So anyway, if you’d like these kinda this solo episodes, hopefully I haven’t totally put you to sleep with my voice nonstop for, you know, 15-ish, 20 minutes here, let me know.

Share Your Thoughts!

Comment on, maybe hit “Reply” to the e-mail that you’ll get about this or comment on the blog post over at ecommercefuel.com/podcast. I would love to hear your thoughts. If you guys like ’em I’ll keep doing ’em in the future. Thanks for listening.

Want to connect with and learn from other proven eCommerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight-knit vetted group for store owners with at least a quarter million dollars in annual sales. You can learn more and apply for membership at ecommercefuel.com. Thanks so much for listening and I’m looking forward to seeing you again next time.

I was recently introduced to a venture capitalist coming to town and wanted to show him a good time. I considered a night with a fancy dinner, the opera, cigars and high-end bourbon. But it didn’t seem quite right. So I decided to take him camping instead. That’s just how we roll in Montana. 🙂 [...]

I was recently introduced to a venture capitalist coming to town and wanted to show him a good time.

I considered a night with a fancy dinner, the opera, cigars and high-end bourbon. But it didn’t seem quite right.

So I decided to take him camping instead.

That’s just how we roll in Montana.

It helped that Zach Ware isn’t your ordinary VC. Apart from loving the outdoors (which helps with the whole camping thing) he’s made dozens of eCommerce investments and worked in high-level roles at eCommerce companies like Zappos.

Our discussion recorded while camping covers his time working with Zappos founder Tony Hsieh, travel, and (of course) lessons learned from making numerous investments in the eCommerce space.

Andrew: Welcome to The eCommrenceFuel podcast, the show dedicated to helping high six and seven figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow ecommerce entrepreneur, Andrew Youderian.

Hey guys, it’s Andrew here and welcome to the eCommerceFuel podcast. Thanks so much for tuning into the show today, and have a really interesting one for you. I’m joined today by Zach Ware who’s the managing partner at VTF Capital, which is a venture capital firm focusing on the ecommerce space. And that’s kind of what Zach’s focused on primarily right now, but in the past, he has been the head of product at Zappos.

He’s been one of the guys leading the charge on the Downtown Project with Tony Hsieh in Las Vegas. Then a lot of really interesting things, and has a very unique perspective on the ecommerce space in general.

And so, yeah. So he…we got to know each other through a common friend who was coming through Bozeman and I figured what better way to have a, you know, first meeting with a venture capitalist than to head out on an overnight camping trip. So that’s what we did. Loaded up the van, headed out, did some fishing, got a fire going, and sat down to talk about a bunch of stuff including, of course, what he sees as some of the commonalities in businesses that he invests in, what his investing thesis is, you know. He talks about his time with Tony Hsieh, and what it’s like to work with him. We cover a lot of ground, ecommerce and otherwise, in this episode. So hope you enjoy it.

So, Zach, where are we right now? Describe where we’re at.

Camping in the Middle of Nowhere

Zach: We’ll have to leave the location to you because I have absolutely no idea. We are in a campsite near the Boulder River, and it’s in the middle of absolutely nowhere Montana. Somewhere near Bozeman but I’m not quite sure where.

Andrew: And so we’ve never met before, talked on the phone, what made you think it was a good idea to come out with some total random stranger and do an overnight camp trip?

Zach: I never said it was a good idea. I had a reasonable suspicion that it was not a bad idea. The jury was still out until about 10:00 last night.

Andrew: We’ve got the axe, so we’ve got like half of the axe murder equation here.

Zach: Yeah. There were other people around though. Right now there’s literally no one else in this campsite so if we’d gotten here yesterday I would have been a little fearful.

Andrew: Yeah. Probably safe to say this is probably the first podcast interview ever done in this campsite.

Working for Zappos

Andrew: It’s been fun, man. So we’ll start with Zappos. You worked for Zappos for how many years?

Zach: I was there for just over three, it was pretty short. Previous to that, I’d come from a company called The Republic of Tea where I ran distribution, and then later, consumer. So all of our web and retail business.

Andrew: And what did do you do for Zappos?

Zach: I ran product at Zappos. So for those who don’t know that in most technology organizations, there’s basically two sides, there’s engineering and product. And product are the people that are kind of…that are charged with being kind of the mixers of engineering and technology, or engineering and business.

So they try to figure out the priorities of the organization, they are the ones that will design the flows of sites and apps, and so forth. So my team ran Zappos.com, VIP, 6PM, the mobile apps we developed and architected, pretty much all the properties in the Zappos family.

Andrew: And you do wanna talk about, a little bit later, some of your other…involving ecommerce, VTF capital investing, things like that, but what… Obviously, I’m sure you learned a ton there, but what did you really take away from that experience that has impacted the way you run ecommerce companies or invest in them today?

Takeaways from Corporate eCommerce

Zach: Well, I mean, I think Zappos was a pretty unique company. I was fortunate to come from the privately held small family business, it was large but held very closely. And, you know, we always looked at business as a…we made decisions for the long term but we were obviously fairly small.

And so what I really appreciated about Zappos was the opportunity to operate at an extraordinary scale. Like, we could have an idea, deploy it and have mounds of data, in an A/B or a multivariate or whatever we were doing, by lunchtime. It was a unique experience to be running a business that was, at the time, well over $1 billion in gross merchandise volume.

The other thing that was interesting, you know, is when you’re dealing with an organization…most of what I had learned at Zappos was really about organizational development and understanding the different priorities you have to manage when you get to that size, decisions that when you make a mistake, they can be multimillion dollar mistakes, you obviously have a little bit of a buffer.

Other things that really stood with me, and an example I use a lot, not really divulging too much here, but they’re… Every day there’s this thing that Zappos sort of used to be, it was kind of a hack together thing called the Zappos Bookkeeper Email. And the Zappos Bookkeeper Email was this gargantuan thing you never wanted to open on your phone because it took forever to load. And it basically had every piece of data about the day’s transactions you could possibly imagine. You can get an hourly one too, but your email will get overloaded.

In fact, once my… I had a blackberry for a period of time and it was off for a long weekend. And I got a call from our IT team the next… I got this hourly report. I got call from IT team on Monday saying that my email account had crashed the BlackBerry server because that hourly email was too big and I had too many of them. But we got this email and we had this…it would have topline revenue, category revenue, brand revenue, individual sales revenue, and so forth. It was a fun thing to peruse.

And I remember thinking… Zappos had a culture and a reputation for doing anything for customer service. So you would call and say, “I bought these shoes two years ago. I hate them. I know you don’t take them back.” Zappos would wow you and send you a new pair. You could order a pizza from Zappos. Zappos culture…customer service culture is the brand.

But you think about that when you’re small and you think that’s expensive. It must cost so much money to be that flexible. And I remember getting this email this one day and we had done $8 million in revenue that day, that day. And we had this line item on the bookkeeper report that tracked all, let’s just call them customers or risk concessions. So anything that wasn’t a full price item at overnight…overnight when we didn’t have to do an overnight, a free coupon, replacement pair of shoes. On that $8 million day, those write downs cost us $300,000. And that’s it, that’s the cost of it.

And what Zappos does to achieve that is give every customer service person 100% latitude to make every decision possible. So you talk to someone on the phone at Zappos, and that person could, without any oversight, put $1,000 on your credit card right there. There’s no checks in the system to stop them from doing that. That culture creates problem solvers, and those problem solvers want the company to be successful, they will not put the company at risk. But the impact of what they do is less than 1/10 of 1%. It’s a huge deal.

So everything that I’ve done since then, with the companies in our portfolio and the companies I’m involved in, that’s one of the things that’s really stuck with me, is if you really orient your service around taking care of the customer in a significant way… You’re gonna have some edge cases that are gonna take advantage of you. You can just deal with those. You want your systems to be about letting humans help humans. And that doesn’t actually cost you that much money in the long run. And look what it did for Zappos. There was a differentiator between $10 million company and a multibillion dollar powerhouse.

Working With Tony Hsieh

Andrew: And you’ve worked a lot with Tony Hsieh at Zappos. You’ve been involved with the Downtown Project really, you know, leading that and building that out at the ground level. What’s he like? We were talking about…does he really live in an Airstream trailer?

Zach: He does.

Andrew: He does?

Zach: Tony is one of my closest friends and we met… After I joined Zappos, actually was brought to Zappos via Alfred who was sort of the COO of Zappos, COO, CFO, and had been with Tony really since the early days. They knew each other in college. Alfred’s now at Sequoia. And Tony and I…by the virtual that my job basically touched… My world touched everything called consumer, Tony cares a lot about that, so we work together a lot and that…it turned into a really deep friendship.

And then we started Downtown Project together. And somewhat accidentally it was never really intentional. We worked on redeveloping the campus. We’re currently partners in a venture firm that’s now focusing on retail and retail tech. And we’ve been close friends for a long time, yet, he lives in the trailer and he has a mohawk.

But, you know, I think what you find about people… And this one of the things that’s been really great about his evolution is, you know, he’s always been proud of being a little bit different. But he…I think before he had the opportunity to…when we first… To understand why he lives in a trailer, you got to understand what preceded that.

A bunch of us moved downtown before we started working on the Zappos redevelopment of the campus, which was my project, and then later, we launched Downtown Project. We all moved downtown. And the two of us first moved into these apartments on the opposite sides of a floor in a building that had gone belly-up during the real estate crisis. And we got wildly luxurious apartments for like nothing. It was crazy, it was awesome, we had to rent them.

And over time, over the next few months, a lot of our friends moved onto that floor. It was a super casual, not intentional. And we ended up having this floor where we all just kind of hang out with each other. So the neighborhood did have a lot of people in it, so we had friends now.

And so Tony really likes that environment, that culture, that sort of collegial feel, of being able just to like knock on a friend’s door and be like, “Hey, what are you doing?” And you don’t get that in suburban environment. And that’s pretty much what we were doing with the city, trying to create an environment where you had the opportunity to collide with people and see people a lot. It’s just like a small tightly knit neighborhood.

One thing led to another, and he ended up buying a bunch of Airstreams, it’s his own story, and decided… One of the properties we acquired in the process of building Downtown Project was an RV park. So he put them all in a big circle in the RV park and… That was three years ago. And over time, it’s evolved into an incredible place. I mean there’s… Oddly, there are two Alpacas there, one of them is really mean.

And there’s a music stage, there’s a cool campfire area. The campfire’s ginormous now. There’s a fire every morning and evening, people just kind of throw events, it’s a very community-oriented place so people do… People might have a…one person might just throw barbecue on a Sunday. There’s lots of kids hanging out there. Off and on, there’s usually kids living there. There’s about 20 people who live there full time and they’re all wildly close friends.

So he, today… I’ve told him this multiple times, I’ve never seen him happier since I’ve known him. He’s more in touch with who he is. He’s comfortable in his own skin in a way that I think all of us struggle to achieve at a real level. Yeah, he’s just a really interesting, authentic human being.

Andrew: You’ve mentioned A/B testing earlier. And one thing like I’d say, you know, if you look at the average like members of the eCommerceFuel community probably a couple million in revenue, and you can do A/B tests. But it takes a while to do them even if you’ve got decent traffic. And you guys had the luxury of being able to iterate on A/B tests really quickly, get a lot of data on a lot of different tests. So when you…So I guess my question is, how often were they really meaningfully beneficial, where you came out with an outcome you made a change on?

The Luxury of A/B Tests

Zach: So first of all, we weren’t terribly good at it. There’s a few of us who remember that the history of how we…we were not actually that good at it, we got better over time. But the thing that I’ve… So leadership is about making decisions and owning them, and then creating an environment where you can test your own assumptions. And so, whether you’re operating at scale or you’re small, people tend to look at testing or look for projections, or look for some study or something that tells them their idea’s right or wrong.

This happens a lot in growing companies. One in particular I’m thinking of, in our portfolios, you know, just near 10 million in revenue. And had a conversation with CEO a couple months ago where he had an idea, that was based upon an experience they had with a…basically giving away a very odd, but related product to their core business. It was a weird thing to get for someone to give you, you always remembered it. And it had a conversion rate that was in the ballpark of 30% to 40%. It was absurd, absurd what they were able to do when they targeted the right kind of people.

And he comes to me and says, “I wanna spend $10,000 and I wanna buy 20,000 units of this thing and I wanna give them out to people at a significant scale, but I can’t make a case for it and my marketing team thinks I’m crazy.” And I just basically said, “Look, you have to… Sometimes as a CEO, you just have to say, this is my idea, I don’t know if it’s a good idea. I need you to back me here, but I want you to be in the business of proving me wrong. So let’s go find the data and see what we can do to prove ourselves right or wrong, to learn something from this. But we’re gonna do this, we’re gonna make this decision.”

And that’s a lot of what we did at Zappos, you know, where we… Zappos is a very individualistic culture. It allows for the free exchange of ideas. It’s not very top down. Particularly today, I left before it moved into its extraordinary self-management phase, though I worked with Tony and that team in a separate company, learning about it before they deployed it at Zappos. And that’s a different type of environment.

But one of the weaknesses in that environment and one of the weaknesses in companies that rely too much on data, or consultants, or other things, is you lose sight of the fact that someone just has to make a decision, you know. So what we did at Zappos was, we would have an idea, we would flush it out as best we could, we knew it probably wasn’t a great idea, we knew we’d learn a lot, and we’d just go with it.

And most of the time, what we were really looking for, we knew where we wanted the company to go and all of our ideas were in line with what we wanted the company to go. We were really looking for reasons that we were wrong. So we would A/B test, not necessarily to see if we were right but rather, did we have a negative impact on the business? Because everything we would push to the site, and everything we’ve…

This is what we do in all of our other businesses is they’re…we’re almost always doing it in a while before we want the company to go over time, where we believe the company should go. So we wanna make sure, particularly when we’re smaller than some of our other companies.

Andrew: So you were approaching A/B testing in a very different way than most. A lot of people come and say, “Hey, I wanna try to optimize the copy on this page where I want the…with the end goal of being maximizing conversion.” But you guys would look at it a lot more from the perspective of saying, “Here’s where we wanna go based on some other factors. Let’s make sure that doing this isn’t gonna be…isn’t gonna materially hurt the core business.

Why You Can’t Immediately React to Data

Zach: Listen, when you’re selling to people, you have to deal with emotions, right? And so you have to try different things. And the data is not always immediately going to show you that you’re right or wrong. What you’re really shooting for is, if your business is operating at an extraordinary scale or even small, if your conversion rate is in the 1, 2, 3, 4, 5% or whatever, if this feels like it’s the right thing for your business, the media thing you wanna make out…make sure you’re not doing is tanking your conversion rate, right?

And if you do decide to tank your conversion rate, you’re doing it…it’s kind of like when Zappos dropped drop shipping early in its history, they lost 25% of their business. They did that consciously. There were times when we would do that in ecommerce, we would make decisions that we knew were gonna be negative on the business for a short period of time.

Andrew: Did you do that just because you guys couldn’t control the whole customer experience. Was that why?

Zach: No. Oh, no, no. So Zappos did that…yes, because they couldn’t control the customer experience. You remember… I don’t wanna make this about…there’s probably someone listening to this who’s gonna roll their eyes and say dropship is actually a great business today, and it is, it’s better. In 2003, getting anyone to ship anything was a foreign concept. And so you would drop an order into… The networks didn’t exist.

So literally, a system would fax or a person would fax in order to a manufacturer…particularly in a payroll they’re really bad at shipping quickly. You couldn’t handle returns, you had no sense of tracking, you couldn’t offer any guarantee to your customers. So that just didn’t make sense for a company that was gonna be all about service, that made a distinct decision to be about service.

But ultimately, when you make decisions that are in line with the values of your business and where you want your business to be, sometimes you have to be comfortable just making sure the data tells you that you’re not totally screwing up. And as long as you see that, you can then allow these tests to elongate over time, particularly if you don’t have as much traffic as we were lucky to have.

Running a Venture Firm

Andrew: So maybe we can move into VTF for a bit. VTF is a venture firm you run with a number of people including Tony Hsieh, he’s one of the general partners there. What’s your focus in investment strategy? Maybe asked differently, what makes you guys different from other VC firms?

Zach: Yes. So we… You know, coming from… We are a very long-term oriented group of people, and that’s important to note when you’re dealing with a firm. A lot of people say they’re founder-friendly, a lot of people say they’re long-term investors and so forth. We, generally…that’s so cliche that we just don’t talk about it a lot, we just talk about ourselves, you know. We’re very long-term thinkers.

If you ask one of my partners, Fred, basically been at Zappos as long as Tony, he was just… He came from Nordstrom, ran the merchandising organization, one of the most interesting people you’ll ever meet. You know, he basically said, you know, when we started working at Zappos, we thought this was gonna be the rest of our lives. Like, we really saw this as a company we were gonna be running for the rest of our lives. And that’s how we invest.

And so we never invest thinking we’re hitting at some sort of lottery. We assume that this is gonna be a long term relationship, and we treat our companies that way. We do not swing our egos in the room. I can say these things because I’ve been through situations where you’re tested and where we… Where you just separate the founder-friendly people from the non founder-friendly people is when things get hard. And I’ve unfortunately been in that position a couple of times a year for the past few years with a company I’ve been very close to. And it’s disconcerting, sometimes, to see what happens in the investment industry when things get difficult.

I think it’s… I think Paul Graham or… I think Paul Graham said once it’s like he’s constantly amazed at how hard investors fight over scraps when a company is collapsing. And that’s very true for…that’s very true, period. You get lot of loss aversion, you get a lot of people swinging egos, and fighting battles for things that are immaterial. You’re fighting between 1% of something and 2% of something that’s probably gonna be worth zero. And we just don’t play that game, you know, we just take a super rational view of the future of retail.

We understand retail economics. We do not get lost in the hype of brands and what, you know, the venture scalability of brands. We understand how you build one, we understand the math of how you build one. Probably everybody listening to this podcast knows the math of how you build a brand, build a product company. And that’s how we invest. And we tell people that… And we believe this, that we are buying the job. You know, we’re interviewing you for various reasons and we encourage you to interview us. I sound like I’m pitching my firm right now, I don’t mean to be. But that’s purely how we see the world.

The Demise of Retail

Andrew: You had… When they were talking about earlier this weekend, their week, I guess, you’re saying that retail, the demise of retail, has been…maybe I’m putting words in your mouth, correct me if I’m wrong, but overstated, you know, people say retail’s dying, it’s shrinking, Amazon’s eating so much of it. And you had mentioned that, well, that’s not really the full picture because there’s a couple of big guys that are really suffering, that’s tainting the overall picture. Can you describe your thoughts on that?

Zach: Yeah. So there are a number of sources of stats that you can look up. In the last year, the general retail industry’s grown 7.3%, ecommerce is up 1.1. Ecommerce is big. Amazon is huge, but the market is a lot bigger. What we’re seeing is a shift away from valuing, for example, the proximity of goods around a consumer. So companies that just…who are solely in the business of just having stuff on hand, that’s no longer valuable to consumers. If you think about how Netflix built their business, they saw themselves as a delivery vessel between content and the consumer.

The delivery vessel is now a UPS truck, and it’s more efficient than…and better priced. More efficient, not only for the consumer but also for the retailer, to have it coming from a warehouse on a UPS truck than it is to have it distributed across 200 stores in the country. So we’re seeing those companies die. And it’s because most of them don’t provide a unique value to the consumer. The time they grew, consumers needed access.

The only way to buy a certain type of product was to buy at a Macy’s that was…there were three in your town and you went to one of them. That’s no longer how you people buy stuff. So we’re seeing that fall apart, and that’s good. I mean that’s just the natural evolution of the economy.

The unique thing that’s happening right now is the internet allows…that’s…how old do I sound. Ecommerce allows… The world wide web allows us to move products to really…globally at the drop of a hat. And what that’s creating is fierce competition for commodity-type products. So products that aren’t really differentiated themselves you can get from four or five different places.

And the behemoths are competing on who can do that more efficiently, more cheaply. So you’re starting to see a lot of those companies die. You’re starting to see a lot of companies die that went…that got really big when big was the only thing they could do to survive. So you’re seeing companies like Gap and J.Crew have problems. Those are just companies that I’m familiar with.

A Growing Industry Overall

Andrew: So who is… You mentioned like retail, in general, is growing seven plus percent, ecommerce is 1.1%, which is totally different from the numbers that I’ve heard. It just surprised… I’m not saying it’s wrong, it’s just…

Zach: No. I think there’s always going to be some issues with who counts what as ecommerce and retail. But the industry is overall growing.

Andrew: Where’s that growth coming from?

Where The Growth Is Coming From

Zach: So the growth is coming… When the economy…you know, when GDP continues to grow between 2 and 3%, that’s generally gonna be an indicator that people are buying more things, so that’s retail. I think that what we’re seeing is just a shift in how people buy things and what they buy. So the commodities are moving to commodity-type movers like Amazon, which is more of a platform than it is a retailer.

And the companies that are really starting to die are the companies that don’t provide a unique value like the ones that I just described or companies like Gap and J.Crew that got really big because they had to in order to get the efficiencies necessary in the ’90s to be well-priced for their consumer. And to get that big, you have to get kind of generic.

And today, it’s just as easy for me to a buy generic J.Crew shirt as it is easy for me to buy a shirt from…there’s a brand I love in Telluride called Western Rise, right? And those guys, I can buy… It’s just as easy for me to buy from Western Rise as it is to buy from the Gap. That’s a big deal, and that’s where retail dollars are starting to shift is to…because it’s just as easy for me to buy things that are made, that reflect what I want or reflect a different level of quality.

And consequently, it’s also just as easy for those companies to make those products at the same price point that Gap was making them at today. That’s a big, big shift. So that’s where the dollars are going.

What Zach Looks for in Investments

Andrew: So maybe a question that kind of brings us those two together, in terms of what works and where retail is growing today, as well as what you guys look for in investments. Like, there’s crossover there because I’m guessing you wanna invest in things that are gonna continue to have a future, that grow well. So what kind of ecommerce company makes you just absolutely drool when it comes across your desk, if you have an opportunity to invest in them?

Zach: So I’m a little… So my general view of the world is that the future opportunity in retail is in companies…is for companies that make and sell their own things. And primarily, they’ll do that direct to consumer or via the channel that makes the most sense for their category. My view about the defensibility then of that business is, it has to start with the product and the supply chain.

And the best way to do that is to be a craft, but I call it craftsman. And so, you know, you can kind of run a spectrum of craftsmen, from the guy who made your axe, the handmade sort of limited scale-type companies. There’s one in Clarksville, Tennessee that makes…I think the BootHill Blades, I bought a knife from those guys and they’re outstanding, it’s a husband-and-wife team. His wife makes kitchen stuff, and they’re amazing. And then you get all the way up to Saddleback bags, you know, which is operating a relatively large scale.

The fanatical nature of the people behind those companies and the people that make those things is extraordinary. When you speak to those people, you get emotionally connected to them. That happens when you’re a consumer. That happens when you go to a shop if they have a store and you’re speaking to someone who just is over the moon about the product.

And those are the people I flip out about. I spent a bunch of time, a couple of months ago, with a company called Sid Mashburn. They’re Atlanta-based. I actually knew them years ago. They’re in the menswear space. I randomly knew them.

Andrew: You said Sid Mashburn?

Zach: Sid Mashburn. And they’re basically like a modern menswear tailor shop. They make the majority of their clothes. The founder of the company Sid, and then there’s a store called Ann Mashburn, his wife, Ann. Sid was the first menswear designer at J.Crew. And they’ve built this incredibly high-touch retail experience with incredibly just… When you talk to Sid about his product and where he sources his fabrics, and how they handle their customer, it is just…it almost makes you cry, you know. And you meet people like that, and those are the people who can defend their product.

And the channel distribution? Who cares. Well, that might be today, we might block that, we might not sell on Amazon. Ten years from now, I don’t think any of us will care. Amazon will be the equivalent of Shipwire, it will just be really efficient. There’ll be basically 3PL, and we don’t care where it goes through Amazon.

Today people are still a little defensive of that. But bottom line is, if you’re making a great product that can’t be duplicated, you can really just kind of ride whatever channel is working at that period of time. But if you’re not making great products, you’re gonna…there’s a lot of competition, there’s a lot of capital that’s gonna be gunning for you and coming after your business.

How To Get Zach’s Attention

Andrew: You know, if there’s someone listening who’s got a business right now, where you could intersect with them and help them, either in terms of just advisory or an investment, what kind of ways can you really help retailers where someone’s listening it might make sense for them to reach out to you and talk to you?

Zach: Well, I think the help from me is overrated. First of all, I would say… Look, I think that the challenge you run into in our world is, you know, I’m an investor. I’m an operator who is reluctantly an investor. There’s some profiles on the internet that say…the way I refer to myself as a reluctant VC.

And so I tend…I obviously carry the moniker of investor, the incentives are built for me to…are such that, you know, my advice…anytime you get advice from someone who would be…who has incentives to gain something potentially from your relationship, you must tread intelligently, I guess is the way to put it. I try to be a person who can transcend that, and I… Typically, my relationship with a lot of bootstrap investors is more of them that we haven’t had an opportunity to invest in for various reasons, then there are people that we’ve invested in.

Most of the time, I spend time, particularly with bootstrap founders, one, because I’m fascinated and wildly interested in what they’re doing. I wanna learn from them. But two, I can…there’s a lot that I can share about what you look for if you’re looking for capital. A big area that we started to focus on, and we spend a lot of time on with both our companies and people that we just know, we meet from your community and elsewhere, is focus on inventory capital, making sure that you nail that. When you’re about $5 million in revenue, I think it’s a lot easier.

But optimizing that sub $10 million in revenue is really, really important. It’ll save you from meeting a lot of equity capital. It will help you sleep at night. And we spent a long time over the last couple years trying to build a structure and relationships and kind of an easy way to open up that capital, and we make that available too… We help people… If it’s a high-quality business, even if it’s not something we would invest in because it might be too small or they don’t wanna raise capital or whatever, we want more people to use those sources because it helps the entire ecosystem.

The Biggest Scaling Problem

Andrew: Would you say that… I mean, you guys invest a lot of times at companies that are, you know, $5 million in revenue and above, would you say that’s the biggest scaling problem you see for most companies, is being able to finance inventory when they’re growing? Is that the number one issue you run into?

Zach: No. It’s the absolutely number one issue. The number one issue is either figuring out how to financing it or what happens when you finance it incorrectly. So what happens in our world, in the ecommerce space, it’s a hot…a little less so today than it was a couple years ago, it was a hot venture capital category.

And we always thought that was crazy because if you think about the math… If you’ve been doing this a while and I said, “Okay, so how did you get from zero to 200 million revenue and in four years and you’re debt-free. Tell me about your equity positions. Tell me about your cap table. Tell me about who owns the business. If you were gonna meet $300 million dollars next year, would you have enough money to fund your inventory?” And the answers are usually no. Most of these companies are extremely fragile.

One little slight oscillation in the availability of venture capital to scale, and they’re kaputs. I mean, look at Nasty Gal, look at… I mean there are…and there are several that have recently had exits that were on the cusp of falling apart.

When you rate…When you grow these businesses the wrong way and you grow dependent upon outside capital to survive, it doesn’t usually end well. Either, you know, implode upon yourself when there’s just a like a tiniest little blip in the radar, or you can’t get to the exit point fast enough. And you put yourself in a position then to really have to sell the company because eventually, the $100 million plus you’ve raised wants their money back. So it’s a really terrible way to run your business, and it’s a really easy…there’s a really easy way not to do it that way.

And I think part of the problem is simply that the companies that do it, and do it well, have been doing at billion-dollar levels for the big retailers for decades, and they didn’t know how to underwrite smaller companies They didn’t know how to find them, they’re just… I like to kind of joke that they’re kind of these old-school banker folks that do this like one thing really, really well and they’re like really hard to find on the internet. You know, they’re not loan sharks in any way, they just don’t…they don’t know how to speak to this emerging business, and they want to terribly.

And so we’ve tried to make that a little easier but it’s important that you do that correctly. That’s the number one question we ask, that’s the number one… We don’t ask that question. We know how to solve it. If we invest in a company, we know we’re gonna be able to help them do it. We ask that question to test for rationality, like, you know, how are you gonna grow from 2 million to 20 million if it’s like we’re just gonna keep raising capital. That’s a little bit of a…either sign of just they don’t know or that’s a little bit of an irrational view. It rarely ends well when you do it that way.

The Lightning Round

Andrew: So I wanna ask you some questions. I ask these of everyone who, or most people that come on the show. And feel free to be just real brief, as the name implies. But first one is, how much money is enough, in terms of money you would have in the bank where if you didn’t want to, you would never feel like you had to work again, you could, of course, because if you wanted to and I’m guessing most of us love to at some level. But how much money would you feel really comfortable with in the bank as being enough?

Zach: So we’ve had a conversation about the robotic nature of some things, like how we can sound like robots. There actually is the mathematics…There’s a mathematical answer to this question, and you can learn more about that answer by going to Mr. Money Mustache.

But, I mean, that answer…the technical answer is 25 times what it costs you to live every year. I’ve actually had this conversation with my best friend, and I think that number, you know, that it is…when you think about all the amount of money you would ever need to spend and live an incredible life, you know, somewhere in the 5 to 10 million range is a pretty good number. I think that if you really… I think that’s generous. But I think for Mr. Money Mustache it’s two and a half million. It’s a great number.

Andrew: Is his two and a half?

Zach: I think it’s two and a half.

Andrew: Oh, I thought it’s less than that because he spends…he’s got like what 30k in annual spending, something like that?

Zach: I feel like his number was 2.5, but I might be screwing the 25s up and turning that into 25 times your annual spend. I might be doing the math wrong. But I also am a big believer in the power of compounding interest. And the majority of, you know, of what I preach is sort of safe investing. And I think you can generate a lot on 8% a year if you keep it in the S&P and have a base amount of money. You need a lot less to live than you think. So I think that five to ten’s a number that I’ve thrown around a lot.

Andrew: Nice. If there is one thing that was gonna bring upon the fall of civilization in the next 25 years, what would it be?

Zach: I think it’s probably going to be a global pandemic. I think the antibioticization of the world compounded with the ease of travel, compounded with the increased density in cities is just a calculus, it’s gonna lead to…it’s probably going to lead to things we can’t predict.

Andrew: If you had to leave your current position, you’ve gotta leave VTF capital, you can’t run a business on your own, you have to work for a company, but you can work for any company in the world, in any role that you want, what company do you work for?

Zach: That’s a great question. I’m pretty sure I’ve thought about this. I would probably be head of operations for an airline.

Andrew: Really?

Zach: Yeah. I think it’d be a blast. I’ve wanted to run an airline my entire life.

Andrew: Why?

Zach: Since I was a kid, I like…this always sounds… I always answer this wrong. People ask me why a lot. I like the ordering of systems and the ordering of chaos. And airlines have so many moving pieces. So if like systems are dots on a map or whatever, they’re just a lot of dots. Airlines have more dots than just about any other system in the world. And they move more quickly and with more dependencies on weather and so forth than anything else.

I mean, you’ve got tickets, bags, security, you’ve got aircraft, employees, food, I mean all these input… The next time you get on an airplane, just look around at all the people whose sole job it is to get that thing to push back. Then once you push back, you’ve got people in dispatch watching over you, you’ve got air traffic control. You’ve got all kinds of things happening. It is such an amazing wonderful, beautiful ballet, that I think it would just be… I’ve always wanted to run an airline.

Andrew: Have you ever been up in a… This is something I’ve always wanted to do. If anyone knows anyone in the air traffic control industry who can get either one of us into an air traffic control tower, please let me know.

Zach: I’ve never tried. I feel like it probably isn’t easy, but probably isn’t all that difficult.

Andrew: Yeah.

Zach: It would be amazing.

Andrew: I think it would be fascinating.

Zach: So fun little facts about me. When I really need to concentrate, I listen to air traffic control.

Andrew: It’s crazy.

Zach: No, I really do. Since broadcast.com, Mark Cuban’s company back when the internet was dial-up and today live in LiveATC launched. I have listened to air traffic control as a thing as long as I can… I have the LiveATC app on my phone, like I can listen to it any time. It’s amazing. I was into it when I…I’m not supposed to do this because I don’t…

Sorry, but I don’t turn my electronic devices off until we take off or to airplane mode, because when I… If you see me on a plane, when we’re on the ground and I have headphones then I’m listening to air traffic control control. I’m listening to ground control while we’re on the plane. I will hear our clearance to take off, and then I’ll go into airplane mode.

Andrew: That’s cool.

Zach: I find it fascinating.

Andrew: I’m gonna have to do that next time, that’s really interesting. What do you spend most your discretionary money on? Like not investment money, not expenses, but money that you just…discretionary.

Gear Heads Unite!

Zach: Probably outdoor gear, to be perfectly honest. I travel significantly. And so a lot of what I do is about experiences. I would say… I have a pretty good tracking of my spending, and I think that I’m an oddball. I track my personal spending in QuickBooks, which is really bizarre, and I consider… I run my life on a P&L and so I can tell you, actually categorically, where I spend most of my money.

Andrew: That’s awesome.

Zach: But the short answer is, you know, is like experiences. And then I justify gear spend as things that I need for more experiences, which I think is pretty much the most irrational thing you can do. But I do travel… When I travel… So I travel a lot for work, significantly enough for work, internationally, in the U.S. and about 40 to 50% of the time. It would be about 25% if I didn’t buffer a lot of my work.

So if I have to go to Boston… I’m a director at a company called Ministry of Supply in Boston. I’m out there quite a bit. I never go for one day, I always go for three or four days. And I just mean…this big principle of mine is leaving slack in the system for like good things to happen, and I do that a lot. My calendar… And so I fly out to Boston for two or three days, and the company will cover some of that, but then I have to cover some of it.

Or I’m in London for work, and European airlines are suicidally cheap, and so you can go to Spain for a dollar sometimes, so I had to pay for the Airbnb. So I spend a lot of money on travel because I think it’s just one of the most important things you can do. I’m a better person because of it.

Andrew: We’ve spent a lot of time this last day or two talking about locations, interesting places to live. I know you’re thinking about, you know, what that looks like for you, but gonna throw you kind of a subset of that question. Community, obviously, is super important and plays a major role in that calculation. But let’s assume that all the people that were close to you in the world said, “Hey, Zach, we’re willing to uproot ourselves to wherever you want us to go, so you could solely focus on geography as, you know, as the issue, place as the issue.

Cost wasn’t an issue, that was something that somebody took care of. Purely based on geography and just the environment, where would you live, if all your friends were there and you had an expense card that paid for all of your, you know, the cost of living expenses?

Zach: Wow, that’s a really phenomenal question. I don’t know. I think of all the places that I’ve been, the places that speak to me the most, Majorca in Spain is probably one of my favorite places in the world. Not because of Palma and the parties, but because of what is outside of that. It’s one of the most beautiful environments I’ve ever been in. It’s mountainous, it’s arid, it’s agricultural, it’s beachy.

Andrew: What’s the name of the place again?

Zach: Majorca.

Andrew: Oh, Majorca.

Zach: Yeah. It’s in the Mediterranean or it’s not really the Balearic sea, but it’s that area of the world where they all…it’s all in the Mediterranean to me. Probably another would be a Mediterranean place. Probably Kalymnos in Greece, you know, I’ve talked about that. It’s a huge rock climbing area, but it’s an amazing place.

But I don’t know, I’m not sure that that’s the right answer. I’m not sure if I have the right answer. It would probably be…I honestly think it would be some place international if all things were free, not because I wanna escape the U.S. but I think that there are some really beautiful places that we under appreciate.

Andrew: Last question. What’s the best book you’ve read in the last year? It doesn’t have to be the definitive one because that’s…sometimes it’s hard to remember what you’ve read, and sounds like you have a terrible memory for books like I do. But one of the most impactful. It’d be in the top three, let’s say, of the books you’ve read in the last year.

Zach: Well, so I’m cheating a little bit here because I reread this book every year. Is that okay?

Andrew: Oh, yeah.

Read This Book

Zach: So the most meaningful book in my life, that I encourage everybody to read, is a book called “Fooled by Randomness” by Nassim Taleb. He’s the author of what… the more popular of the three books is “The Black Swan.” I think that “Fooled by Randomness” is one of the better books I’ve ever read. But I’d cheat so I’ll give you a second answer that I read in the last year. I think one of the best books I’ve read is “The Outsiders.” I don’t read a lot of business books, I read mostly history, biography, science.

Aside from “Ego Is The Enemy” which I recommend everybody…the business book that I think is one of the most meaningful, and for your audience too, will probably be really incredible, it’s about, basically, the eight best nonconformist, nontraditional capital allocators of all time. So Warren Buffett, the CEO of Ralston Purina, whose name I can’t remember, Tom Singleton, a few other, just greats.

And it just reminds you how important it is to have your own view of things and having to do things your own way. And that the race will, you know, the scoreboard, the long-term scoreboard always goes in the favor of those who make good decisions and forget what happens in the short run.

If you combine “The Outsiders” to “Fooled by Randomness,” you’ll never care about PR ever again. Like, you’ll never care about blog posts or Twitter followers ever again because it, you know… That’s not super true but meaning, the short-term stuff is a lot less important than what you build over the long term. And “Fooled by Randomness” convinces you that that’s important, and then “The Outsiders” shows you empirically that it actually can work at significant scale.

Andrew: So if you’re interested, you can check out… I highly recommend it, zgware.com, that’s Zach’s blog. He talks about travel, life…

Andrew: It’s still…it’s great. Check out zgware.com, as well as VTF capital. What’s the website for VTF?

Zach: Vtfcapital.com

Andrew: Dotcom. Okay, great. If you’re interested in what he’s doing there, make sure to check him out. Zach, it’s been a fun night…

Zach: This is awesome.

Andrew: …fun camping, fishing and hanging out talking shop. I appreciate you coming and hanging out in Bozeman. And thanks for being on the show.

Zach: Sure, man. Thanks so much.

Andrew: Yeah. Want to connect with and learn from other proven ecommerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight-knit vetted group for store owners with at least a quarter million dollars in annual sales. You can learn more and apply for membership at eCommerceFuel.com. Thanks so much for listening. And I’m looking forward to seeing you again next time.

Missed your chance to get rich with Bitcoin? It’s not too late. Just start selling on Amazon FBA in Europe and watch the money roll in while you drink Pina Coladas in your Star Trek pajamas! Joking, of course. Any real business is going to take a lot of time, effort and work. But with [...]

Just start selling on Amazon FBA in Europe and watch the money roll in while you drink Pina Coladas in your Star Trek pajamas!

Joking, of course. Any real business is going to take a lot of time, effort and work. But with Amazon in the U.S. becoming increasingly competitive less saturated markets like Amazon FBA Europe offer interesting opportunities.

John Cavendish joins me today to share his experience growing an FBA Amazon Europe business and discuss the ins-and-outs of what you need to consider if you want to be successful.

(With your host Andrew Youderian of eCommerceFuel.com and John Cavendish of FBA Frontiers)

Welcome to the eCommerceFuel Podcast, the show dedicated to helping high six and seven figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow eCommerce entrepreneur, Andrew Youderian.

Andrew: On the podcast today is John Cavendish and we talk about selling on Amazon FBA in Europe. There’s a lot of nuances to sell to Europe and we talk about the logistics, including shipping, managing different countries and where opportunities lie.

Getting Into Amazon FBA Europe

Andrew: What’s your experience with Amazon and how did you get into this?

John: I started selling on Amazon at the start of 2015. I started trying to source products in December 2014 and went live in February 2015. I really didn’t know what I was doing .I got a few review friends from and family and gave away products to people in my crossfit gym. Soon enough I was shipping 8 to 10 units a day so I though I can make something of this. So I got more products to sell in the UK.

Andrew: Did you start from scratch on Amazon?

John: I just started on Amazon, I was listening to Steve Chou’s podcast and they were talking about selling on Amazon US and I thought I would try to do it in the UK. After about 10 months I realized I could sell to the EU and it just grew from there. My business doubled every month for about 5 or 6 months from there.

Andrew: What are the other big stores within Europe for Amazon with their own URLs?

John: There are five major marketplaces. There’s the UK, Germany, Spain, France and Italy. From those marketplaces it actually fulfills to 26 different countries around Europe which gives you like 700 million plus potential buyers.

Andrew: Can you handle all those? Let’s say you’re in the UK and you have your Amazon Central seller account. Can you run all of those other five Amazon portals and by extension rest of Europe from one login?

John: Yes. It’s basically like the American and Canadian account. So you login and see each marketplace individually by selecting from the dropdown menu.

Andrew: When you launched you were living in the UK. Have you ever lived in the US before?

John: I lived in Canada for a year.

Andrew: What’s the demand relative to the US? I know we’re pretty saturated here, but what does it look like in Europe as far as demand goes relative to how popular it is in the US? Where are we on the adoption curve?

John: I’d say in the UK and Germany the adoption is pretty behind, it still has a way to go. It’s still growing in France, Spain and Italy. But that’s definitely an advantage to you as a seller because if you launch something that’s doing well or ok or good volume now, it’s going to do an amazing volume by the time saturation point reaches somewhere near the States.

Andrew: Do you know your growth rates in terms of revenue are for each country?

John: No, Amazon doesn’t separate each country like they do in the USA.

Andrew: And how is the trust factor in Europe? I know that in the US there’s seems to be this trifecta of prices, trust and convenience in terms of shipping and selection. In our culture it’s almost trusted and respected. What is like in Europe? Was it like it was for us 5 years ago when people looked skeptically at Amazon?

John: They’re pretty trusted. Some European countries have ecommerce platforms which are pretty successful. For example in Holland they have BOL.com which is a separate entity and Amazon is launching their own platform at the moment. Amazon is actually investing heavily in Europe, like hiring extra 2,000 staff in the UK to help with European expansions. You can actually take advantage of these European countries because they’re advertising offline, on billboards which in the states they don’t need to do anymore.

Competition in Europe

Andrew: What about competitiveness relative to the US? I see the life cycle of Amazon in the US as in the beginning you could resell products and make a profit, and then move into white labeling a product then now making products with small tweaks. Where in Europe are they at for Amazon FBA as far as the life cycle goes?

John: You can definitely resell existing products to be profitable at the moment. But as with the States, and as more people move over from the states, it’s going to get more competitive very quickly. If you can get in there now with a tweak product, something that’s unique then you’re going to set yourself up for a lot more longevity in your Amazon business. I was doing research this week for some brands I’m launching and it’s amazing how many Chinese sellers are doing well even in Europe and they’re actually selling their own product from the factory. They’re even dominating some categories. So if you come in there with a differentiated product with better marketing and branding then you’ll 100% be able to sell very quickly.

Andrew: Walk us through your marketing research techniques if you’re starting from scratch. I’m assuming the best way to get started is to move your existing catalog over to Europe, but is the research techniques going to be the same as in the States?

John: You need to think of the EU as a different beast than the US. These five different marketplaces are like five different states but they don’t interact with each other so you’d want to start out in one of the bigger marketplaces like UK and Germany. You can do it the same way you’d do it in the States. Look for things like sales volume, what you think you can compete with, target sales price. You want to find something that sells well in three of the five marketplaces. Each of these marketplaces is like having a different Amazon.com account, the reviews are separate. So you can launch a product in the UK that you think will sell well but maybe it does. It could take off in France or in Italy. So you’re diversifying your risk by making sure it’s going to do ok in three to five of the marketplaces. It could be a dud in the UK but it could take off in other places and push 500-1,000 units a month.

Andrew: On the review side, it looks like you have to build up three, separate and unique review banks so you don’t get the benefits of having them all together?

John: That’s fair, but because of the common language, American reviews do carry over to the UK, at least until you have your UK reviews. They will show up below the UK reviews once you’ve got those. For every other marketplace it’s separate. As well as being a disadvantage at having to get them but if you get a negative review in one marketplace it doesn’t translate into negative reviews in another one.

Doing Research for Amazon Europe FBA

Andrew: What do you use for research to try to figure out what’s doing well right now? Are you using traditional things like Jungle Scout to be able to see what’s selling well?

John: I use Jungle Scout to lift data because it’s a great tool for pulling data on a page of you can get your VA to do it. To be honest I just choose what niche I’m just going to go into and want to deep dive personally into it. Because it’s your business and your brand. It’s you that’s going to see these products all the time. There’s opportunities in every niche and I think too many people just look at Jungle Scout and see a product that’s selling well and doing a “me too” product. That’s not a way to build something that’s going to last in the long term.

Andrew: So what I’m hearing is that you’re more focused on a more qualitative approach rather than a quantitative approach. Maybe you’re using the quantitative approach to do initial research but then you’re less focused on the sales per skew and you’re going to dive into to look and see where you can add value via a broader catalog offering or issues with a current product?

John: Definitely. I’m quantitive to start with because that’s for background. Then you really want to see how you can change it in terms of quality or if you can have separate products together or you can try to dominate several categories.

Getting Translations of Product Descriptions

Andrew: Let’s say you’ve got things listed on Amazon. You’ve got a separate listings page for all these five marketplaces. How do you deal with that? Do you write it in English then get translators?

John: That’s exactly what I do to be honest. I always write the one in English, optimize for the English listing and then I get some to translate it.

Andrew: Do you get someone on Fiverr or do you have a recommended place where people can go to get things translated for good quality and reasonably priced?

John: I would definitely recommend the service that we’re launching, obviously. But you can use UpWork and Fiverr but the quality varies massively. I mean, you can’t get a good translation for $5 especially for a language like German where there’s no other company that speaks German other than Germany. Translators for that are expensive. We’re launching a service called FBA Translations where there’ll be professional translation services optimized for Amazon so you just send us a link to your listing and we’ll send you back a translation 10 days later.

Andrew: Perfect. Where have you used in the past?

John: To be honest I’ve just done outreach to my network. It’s the easiest way to find quality translators that work. I’ve tried UpWork and other places but at the end of the day I talked to other European sellers.

Shipping and Profit Margins

Andrew: What are the differences between someone who might be experienced in Amazon FBA coming to Europe? Anything they may be surprised by or need to be aware of?

John: Because you’re selling across multiple countries, you’ll need to be aware for the long term are your packaging and pricing. You’ll have different competition in different marketplaces so you want to price each product differently. You should launch in the marketplace simultaneously but you can tweak everything after you launch. Europe is so open that you want to be there as soon as possible and you can start working on all these optimizations as you go along.

Andrew: What about shipping products in? You’re living in Saigon now selling in Europe, but I’m assuming you’re ordering from China. How does someone who does not live in Europe think about this? When I think of shipping it directly from China to FBA or the other is maybe paying double shipping where you ship from China to Saigon then to Europe. What are your thoughts on that?

John: It depends on whether you have established skews you want to bring across, being new or skews or a new supplier. I mean, do you trust the supplier? There are many international sellers who are not based in the States and selling in the states. The way they get around it is to either get it inspected in China or to use a prep service. So there are prep services in the UK as well. You could do that or you should oversee your own inspections from China, like seeing the factory before ordering and inspecting the product after ordering. Personally, I ship directly from the UK and I’m not in the UK. I trust my suppliers and I’ve been working with them for two and half years.

Andrew: Do you then have a prep services that moves it onto Amazon warehouses or us it right into Amazon?

John: It depends. I’ve been trying out some big products recently, like £50, 3 feet long. We got them fully inspected in China and then when they arrive in the UK we got photos done of the boxes to make sure they weren’t damaged then forwarded to Amazon. We actually used a freight forwarder for that and that was a cheaper way of sending it than using a prep service then reloading it into containers.

Andrew: Interesting. We’ve done many surveys with merchants and one of the things we’ve talked about was profit margins. On Amazon and even in your own store it was pretty close to 17%-18% profit margin. If someone is going to start selling in Europe right now would they plan on seeing the same margins or it may be higher given it being a newer marketplace?

John: My average margin for last tax year was about 23% I think. Our margins are being slightly pushed down this year. It might be 20% to 21%. I think too many people when they’re doing their calculations they overestimate what they can sell a product for and they underestimate the costs it’ll be to get it into the country. You should be looking to charge the minimum sales price if you’re looking to be undercutting your competition. When you’re doing your initial calculations aim for 30% margin. When you’re aiming for 30% margin after sales tax, after everything then you should be able to take home that 25%.

Getting Reviews For Your Listings

Andrew: We talked a little bit about getting reviews before. Whereas in the EU you have all these different marketplaces and in the US there’s been a grey hat around that. Of course Amazon has cracked down on that more the last year or so. I’d say the difficulty for most people is getting a good base of quality reviews, even more so now that Amazon’s allowing customers to opt out of follow up emails. What’s the situation with that in Europe? Are they just as hardline with their approach with reviews in Europe and what are your suggestions on how you get those baseline reviews?

John: In Europe, Amazon changed the rules like they did in the US last year. I know because it was my birthday and I woke up and read the news and was like everyone was saying the world was ending. And the world didn’t end. They changed the rules again a few months later but they haven’t started the opt out function yet, which I’m sure it’ll be coming, because everything in the US will get rolled out to Europe. Most of your follow up emails will go through when you sell in Europe. This is amazing as Europe is still like Amazon 3 to 5 years ago of the Wild West, in terms of you should be able to choose the number 1 bestseller who’s got like 20 reviews. SO your aim is to get three reviews and turn on PPC, using all the modern PPC techniques that people have been working on in the states. Just throw money at it and you should be able to rank. A really good example of this is I launched a product about a month ago and surprisingly in Italy it got 10 reviews now, which is a really good review rate. It averaged 4.7 stars and I was really surprised it took off in Italy. That’s why you want to get your listing live in every marketplace straightaway and start throwing PPC at it as soon as possible.

Andrew: And these are just coming organically from people seeing your follow up emails?

John: Yeah, so that was surprised we got ten, because that’s like a 4% or 5% conversion rave, because that’s like usually 0.5% if I’m lucky.

The Opportunity in Amazon Australia and Beyond

Andrew: Wrapping things up here, let’s talk about Amazon in Australia. There was a thread in eCommerceFuel getting early access to that. You actually have an Amazon Australia account. Just talk about quickly why you’re getting into Australia, your thoughts and plans for that market.

John: Our product is called FBA Frontiers and we’re working out into all the new frontier markets. We see Australia as one of the next markets. Australia is a much smaller country. It’s about a third the size of the UK but there’s going to be a lot of opportunities at the start for people to move quickly to launch there. But it seems to be at the moment that FBA might not be going live for a while so it’s going to be more difficult to do business outside unless you ship long distance. So it’s just something we keep our eyes out for, trying to get into it then we can hope to bring it to our clients.

Andrew: You mention other markets too. What other markets do you think where there are opportunities outside of Europe, Australia and the United States in terms of Amazon marketplaces that are either growing quickly or coming soon?

John: The biggest established marketplace outside of that would be Japan. We don’t personally sell in Japan yet but it depends on what your products. But yeah, Japan would be the next one to go for if your product suits the market. Japan’s a massive marketplace.

Andrew: What about India and China given just how big they are. Are those places you’re looking at?

John: So in China it’s really interesting. The slight issue in China is that you need a local partner and you need a local company to get into it. It’s something we’re looking at but it’s not on the low hanging fruit at the moment. The low hanging fruit is for USA is to get to Europe.

Andrew: Are there any places for opportunities in Central American or South America?

John: My friends who are sellers in the US who are doing very well are moving towards Mexico. So far nobody I know of has runaway success with Mexico with all the issues with exporting products and getting it there to sales not being very good. But I also have friends who are doing pretty well in Canada so if you’re in the US that would be another move that I would make.

Andrew: You’ve alluded to FBA Frontiers is a course and website that really talks about all this kind of stuff. Can you give an overview about what FBA Frontiers is and what people can learn if they check it out?

John: Cool. So it’s basically just a course for sellers that are already selling to help them launch in Europe quickly. It goes over evaluating your current aims, research and bringing across the product from the US that’s going to take off more quickly with the least competition. Also, getting set up for VAT and sales tax registration. Then we talk about Pan-European registration versus single registration which is another huge topic because you want to decide whether you want to register in many countries or one country and where you want to hold your inventory. We talk about packaging for the European marketplace and logistical options of which packaging is best for which country. We talk about launching and marketing in Europe, which covers basic PPC strategies to rank quickly in Europe. Anyone who signs up through FBAFrontiers.com/fuel gets a free 30 minute call with me as a thank you to you for having me on.

Wrapping Up

Andrew: So if you’ve decided you want to launch over there after listening to this head over to FBAFrontiers.com/fuel and check out the training. Before we sign off here, let’s shift gears to a fast lightning round here. We’d love to get your quick 5 second reactions here to these questions. If you’re ready I’ll dive in.

John: Sure, fire away.

Andrew: If you had to identify the number one thing you’re trying to optimize your life for right now, what would that be?

John: I would say balance and health. I just moved from a new condo which is 10 minutes from the pool and the gym and I’m just trying to get work done and get healthy.

Andrew: Who’s someone you strongly disagree with?

John: This is a hard one because I’ll get pushed back very hard on this but recently I would say Gary Vaynerchuk because all of his stuff is about working 24/7 and having no life outside of it. I don’t agree with that.

Andrew: Who’s your favorite author?

John: When I was younger I was really into fantasy and my favorite author was an English guy called Chris Wooding. He wrote a young adult series called “Broken Sky” and one called “The Braided Path”.

Andrew: How much money is enough? What would be your number? And this is money in the bank, where if you had an X amount in your bank account, where you’d still work if you want to but you wouldn’t feel the need to unless you were interested in something.

John: If this over the next 50 years to spend and invest, then I’d say $10 million. But not in USD, it’d be a mixture of all currencies and spread out because going after Brexit and your money just gets devalued 25% in a month, then I would never keep my money in one currency again.

Andrew: What’s the worst mistake you’ve made in the last decade?

John: In terms of loss? Of money? Having my money all in British pounds.

Andrew: Interesting. I’m sensing a theme here John.

John: That’s ok.The pound went up against the dollar like 3% last week. In general any investment I get nothing out of is bad, is a waste.

Andrew: What’s the best investment apart from your business that you’ve made in the last 10 years?

John: I can’t think of anything that wasn’t a cliche. So travel, seeing the world.

Andrew: I’ll take it. And finally, what was the first CD you’ve ever owned?

John: Nickelback. I remember sitting in the school bus for a trip and listening to it in a Sony Walkman CD player, when I was 14 or something like that.

Andrew: How cool was that that you got a CD player. Was it just Sony?

John: Yeah.

Andrew: Yeah I remember that. You thought you were on top of the world. John this has been phenomenal. I really appreciate you diving in and giving us into a window to the FBA in Europe and taking the time to talk to us.

John: Thanks a lot for having me.

Andrew: Want to connect with and learn from other proven eCommerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight-knit vetted group for store owners with at least a quarter million dollars in annual sales. You can learn more and apply for membership at eCommerceFuel.com Thanks so much for listening, and I’m looking forward to seeing you again next time.